KEY to the CSP-2015 Indian Polity Test 5 Dated 15.12.2014

KEY to the CSP-2015 Indian Polity Test 5 Dated 15.12.2014

1.	d	21.	a	41.	b
2.	a	22.	c	42.	a
3.	a	23.	a	43.	a
4.	a	24.	a	44.	d
5.	c	25.	a	45.	c
6.	b	26.	b	46.	b
7.	b	27.	b	47.	c
8.	b	28.	d	48.	d
9.	d	29.	c	49.	b
10.	b	30.	c	50.	c
11.	d	31.	a	51.	c
12.	c	32.	b	52.	b
13.	c	33.	b	53.	d
14.	d	34.	c	54.	c
15.	c	35.	a	55.	b
16.	a	36.	d	56.	b
17.	a	37.	a	57.	a
18.	d	38.	a	58.	b
19.	c	39.	c	59.	d
20.	a	40.	b	60.	d

Explanations:

1 to 14. Read the provisions of article 370 and 371 which are very important in view of the elections of the J and K and special discussion on the article 370. See a detailed note on the special status of J and K and on special category states from main point of view.

15. After 44th Amendment Act, 1978 suspension of Fundamental Rights under Article 19 can happen only on the case of War or external aggression not in the case of Armed Rebellion [Art. 358]. Similarly, the enforceability Article 359 of FRs under Articles 20 and 21 cannot be suspended even under National Emergency.

16. Under Article 250 when National Emergency is in force, Parliament assumes Concurrent Legislative Jurisdiction over all the subjects under the State List. State Legislative Assembly is not suspended or dissolved. It continues to enjoy the jurisdiction over state subjects but Parliament also assumes legislative powers on such subjects.

17. If the President is satisfied that there exist a grave emergency whether due to war or external aggression or armed rebellion, then President can proclaim emergency to that effect. He can also proclaim even before the actual threat occurs. The satisfaction of President under Article 352 can be challenged in a court of law on the ground of mala fide. Hence, answer is ‘a’.

18. In S.R. Bommai and others Vs Union of India, 1994 Case, the Supreme Court laid down that the powers vested in the President under Article 368 are not absolute but are open to judicial review. However the power of Judicial Review related to Article 356 shall be applicable only on 3 grounds:

(1) Whether the proclamation was issued on the basis of any material.

(2) Whether the material was relevant.

(3) Whether the exercise of power by the President was mala fide.

Under Article 356, President is justified to make use of powers a only when there is a Constitutional Breakdown in State and not on the basis of the breakdown of administrative machinery. If the State Government fails to carry out the administrative directions given by the Centre, or when State Government fails to fulfill its obligations given in the Preamble to the Constitution, this amount to the breakdown of the constitution machinery. The Court held that it holds the power under Article 356 and under Judicial Review to provide suitable remedy if there is mala fide intention from the part of President. Court also held that powers held under Article 356 should be sparingly used by the constitutional balance between the Centre and the States. The report of the Governor is one of the sources, but not the sole source to make an opinion on the breakdown of the constitutional machinery by the President.

19. Under Article 360 the President enjoys the power to proclaim the financial Emergency. If he is satisfied that a situation has arisen that financial stability and credit of India or any part thereof is threatened he may proclaim emergency to that effect. All such proclamations
(a) Can be varied or revoked by the President.

(b) Financial Emergency must be approved by the Parliament within 2 months after its

proclamation. Once it is approved, it will remain till the President revokes it.

Effects of Financial Emergency

 (1) President is empowered to suspend the distribution of financial resources with States.
(2) President can issue directions to States to follow canons of financial propriety.
(3) He can direct State Government to decrease salaries allowances of Civil Servants and other Constitutional dignitaries.

(4) President can direct the government to resume all the financial and Money Bills passed by legislature for his consideration.

(5). The President can issue directions for the reduction of salaries and allowances of Judges of the Supreme Court and the High Courts.

22, 24, 25 and 26: Article 343 and Article 351 and Special Position of Sanskrit
Hindi, as we know had become a symbol of nationalist feelings during the freedom struggle of India and the leaders encouraged its use. We have been told that the Sanskrit had lost the position of official language of the Union by a casting vote. Article 343 gave Hindi the status of official language of the Union. For Sanskrit, there is a special status mentioned in article 351, whereby Sanskrit was given a position of the primary source language for many languages including Hindi.

Calls for Classical Languages

The first call for a classical language was given by Tamil academicians. They claimed that the Sangam anthologies should be considered as classical languages. It’s an ancient language and the old Tamil is the prototype of the Dravidian family of languages. The government took a note and then consulted the experts of the Sahitya Academi. Later a committee was established and some criteria were established to grant the status of Classical Languages.

Criteria for Classical Languages in India

The government of India currently follows the following criteria to determine the eligibility of language to be considered for classification as “classical language”:

ü  High antiquity of its early texts/ recorded history over a period of 1500-2000 years.

ü  A body of ancient literature/ texts, which is considered a valuable heritage by generations of speakers.

ü  The literary tradition is original and not borrowed from another speech community.

ü  The classical language and literature being distinct from modern, there may also be a discontinuity between the classical language and its later forms or its offshoots.

Current Classical Languages

The government declared Tamil (in 2004), Sanskrit (in 2005). These two languages are undoubtedly parental sources for many languages belonging to the Indo-European family and the Dravidian family of linguistic groups. Later the government declared Kannada and Telugu (in 2008) as classical languages of India. In 2013, Malayalam was also given status of classical language. In 2014, Odiya was also given the status of Classical language.
With this the following six languages are included in the list of Classical Languages:

·         Tamil (since 2004)

·         Sanskrit (since 2005)

·         Telugu (since 2008)

·         Kannada (Since 2008)

·         Malayalam (since 2013)

·         Odiya (since 2014)

The concept of classical language is important as more and more languages are demanding that status. The latest demand is from Marathi.

23. The 22 languages recognized by the Constitution in VIII schedule are  1) Assamese, (2) Bengali, (3) Gujarati, (4) Hindi, (5) Kannada, (6) Kashmiri, (7) Konkani, (8) Malayalam, (9) Manipuri, (10) Marathi, (11)Nepali, (12) Oriya, (13) Punjabi, (14) Sanskrit, (15) Sindhi, (16) Tamil, (17) Telugu, (18) Urdu (19) Bodo, (20) Santhali, (21) Maithili and (22) Dogri. Gondhi is a tribal dialect of Gonds of AP and adjoining states which is not recognized by the constitution and therefore answers is “a”.

30. The G4 Nations:

The G4 nations comprising Brazil, Germany, India, and Japan are four countries which support each other’s bids for permanent seats on the United Nations Security Council. Unlike the G8, where the common denominator is the economy and long-term political motives, the G4's primary aim is the permanent member seats on the Security Council. Each of these four countries has figured among the elected non-permanent members of the council since the UN's establishment. Their economic and political influence has grown significantly in the last decades, reaching a scope comparable to the permanent members (P5). However, the G4's bids are often opposed by certain countries, particularly their economic competitors or political rivals

Friends of Fish Group [under WTO]

During the Ninth WTO Ministerial Conference in Bali, Ambassador Michael Punke joined trade ministers and ambassadors from the Friends of Fish group to mark their shared commitment to the elimination of harmful fisheries subsidies. The group’s twelve member countries, which include Argentina, Australia, Chile, Colombia, Costa Rica, Ecuador, Iceland, New Zealand, Norway, Pakistan, Peru, the Philippines, and the United States, pledged to refrain from introducing new, or expanding existing, subsidies that contribute to overfishing or overcapacity. By putting an end to harmful fisheries subsidies, WTO Members can help ensure that fishermen maintain a sustainable supply of fish to provide consumers at home and abroad, and a critical means to support their families. During the joint statement, Ambassador Punke emphasized the United States' commitment to work with WTO members to discipline harmful fisheries subsidies that not only distort global markets and place additional stress on the many of the world's rapidly depleting fisheries resources, but also jeopardize our oceans for future generations. According to the Food and Agriculture Organization (FAO), thirty percent of the world’s fish stocks are reported to be overfished, and in some cases at risk of collapse. Ambassador Punke also highlighted the ongoing Trans Pacific Partnership negotiations as an important opportunity for the United States and other ‘friends of fish’ to set an example on this important issue.

The Doha Ministerial Conference first launched negotiations to improve disciplines on fisheries subsidies, and the Friends of Fish group was established to target and prohibit harmful subsidies that contribute to overfishing and overcapacity of fish environments

Cairns Group:

The Cairns Group is an interest group of 19 agricultural exporting countries, composed of Argentina, Australia, Bolivia, Brazil,Canada, Chile, Colombia, Costa Rica, Guatemala, Indonesia, Malaysia, New Zealand, Pakistan, Paraguay, Peru, the Philippines, South Africa, Thailand and  Uruguay.

The Group takes its name from the Australian city of Cairns, where its inaugural meeting took place in 1986. The Australian Government led the formation of the group, though some of the South East Asian countries had been working together on agricultural trade through ASEAN.

The move to form the group was largely a response to the spiralling trade subsidies of the European Union's Common Agricultural Policy and the United States' Export Enhancement Program. Particularly, the objection came to the double standards between the General Agreement on Tariffs and Trade (GATT) forcing countries to liberalise their economies, whilst the United States was granted a waiver for agricultural protection in the 1950s.

The Cairns Group's objective is to bring about liberalisation of global trade in agricultural produce. In particular, its members aim to abolish export subsidies and trade-distorting ("amber box") domestic support measures for agricultural products and seek to improve market access for exported agricultural goods. The coalition attempts to present a common front in multilateral trade negotiations at the World Trade Organization (WTO), tabling joint proposals and occasionally working with like-minded groups such as the G20 group of developing nations.

31. The National Integration Council (NIC) is a group of senior politicians and public figures in India that looks for ways to address the problems of communalism, casteism and regionalism. The National Integration Council originated in a conference convened by Prime Minister Jawaharlal Nehru in September–October 1961. The purpose was to find ways to counter problems that were dividing the country including attachment to specific communities, castes, regions and languages.

The conference set up the NIC to review national integration issues and make recommendations. The NIC met for the first time in June 1962. The fourteenth meeting was held in New Delhi on 13 October 2008. The fifteenth meeting was held on 10 September 2011 in New Delhi. The latest meeting (sixteenth meeting) was held on 23 September 2013

33. Panchasheel

The Five Principles of Peaceful Coexistence, known in India as the Panchsheel Treaty (from Sanskrit, panch:five, sheel:virtues), are a set of principles to govern relations between states. Their first formal codification in treaty form was in an agreement between China and India in 1954. They were enunciated in the preamble to the "Agreement (with exchange of notes) on trade and intercourse between Tibet Region of China and India", which was signed at Peking on 29 April 1954. This agreement stated the five principles as:

1.   Mutual respect for each other's territorial integrity and sovereignty.

2.   Mutual non-aggression.

3.   Mutual non-interference in each other's internal affairs.

4.   Equality and cooperation for mutual benefit.

5.   Peaceful co-existence.

[Additional information, but imp: Gujral Doctrine

The Gujral Doctrine is a set of five principles to guide the conduct of foreign relations with India’s immediate neighbors, notably Pakistan, as spelt out by IK Gujral. The doctrine was later termed as such by journalist Bhabani Sen Gupta in his article, India in the Twenty First Century in International Affairs.

The five basic principles: First, with the neighbors like Nepal, Bangladesh, Bhutan, Maldives and Sri Lanka, India does not ask for reciprocity but gives all that it can in good faith and trust. Secondly, no South Asian country will allow its territory to be used against the interest of another country of the region. Thirdly, none will interfere in the internal affairs of another. Fourthly, all South Asian countries must respect each other’s territorial integrity and sovereignty. And finally, they will settle all their disputes through peaceful bilateral negotiations.]

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Special Status of Jammu and Kashmir:

We all know that immediately after independence, a major column of armed men from Pakistan had invaded Kashmir and they were nearly successful in capturing Srinagar. Confronted with the chances of losing Kashmir to Pakistan, Maharaja Hari Singh requested help from India. Immediately, Patel’s aid V P Menon arrived in Srinagar and told the maharaja that India could take action only if Kashmir acceded to India. It is widely believed that Maharaja wanted to keep is independence but reluctantly acceded to India due to the grave situation created by the Pakistani invaders. Thus, on October 26, 1947, Maharaja Hari Singh signed the Instrument of Accession.

Here, we need to note that the accession was partly provisional. For example, clause 7 of this instrument read that Maharaja was NOT committed to accept the future constitution of India. Similarly, clause 8 said that nothing in the instrument affected the sovereignty of the Kashmir. The subjects that were surrendered to India included Defence, External Affairs, Communications and some ancillary subjects such as elections and jurisdiction of courts in these three matters.

With such instrument in hands, India had sent its forces to Kashmir. Later, Sheikh Abdulla, who was under custody, was released by Maharaja Harsingh. Abdullah, although condemned the Pakistani attack on Kashmir yet asserted the sovereign right of the people of Kashmir to decide their future. In 1948, he was made the prime minister of Kashmir.

Meanwhile regrettably, Kashmir issue was taken to UN by Nehru and the issue was given a tag of international dispute between India and Pakistan. Not only that, India also made a promise of plebiscite in Kashmir. However, the idea of separate Kashmir was overruled.

By 1949, Sheikh Abdullah and Maharaja Harisingh decided that Kashmir should remain united with India with maximum possible autonomy. India granted a special status to Kashmir in article 306A of the draft constitution. This special status was given as per clause 7 of the Instrument of Accession. At that time, Hasrat Mohani had objected the special status. But he also expressed hope that in due course Kashmir would become ripe for same kind of integration as similar to other states. The Article 306A was enshrined as Article 370 in the constitution as a “temporary provision”. Sheikh Abdullah did not want that to be a temporary provision and insisted for his iron clad guarantee of autonomy but India did not accept that.

Implications of Article 370

Under the Part XXI of the Constitution of India, which deals with “Temporary, Transitional and Special provisions”, article 370 is a temporary provision granting special autonomous status to Jammu and Kashmir. This article specifies that except forDefence, Foreign Affairs, Finance and Communications the Indian Parliament needs the State Government’s concurrence for applying all other laws.  This has some peculiar implications as follows:

Applicability of parts

·         Most provisions of the Constitution which are applicable to other states are not applicable to J&K. Part VI in whole is not applicable to Jammu & Kashmir.

Jurisdiction of Indian Parliament

·         The Jurisdiction of the Parliament of India in relation to Jammu and Kashmir is confined to the matters enumerated in the Union List, and also the concurrent list. There is no State list for the State of Jammu and Kashmir. At the same time, while in relation to the other States, the residuary power of legislation belongs to Parliament, in the case of Jammu and Kashmir, the residuary powers belong to the Legislature of the State, except certain matters to which Parliament has exclusive powers such as preventing the activities relating to cession or secession, or disrupting the sovereignty or integrity of India.

·         The power make laws related to preventive detention in Jammu and Kashmir belong to the Legislature J & K and not the Indian Parliament. Thus, no preventive detention law made in India extends to Jammu & Kashmir.

·         Kashmir enjoys some other privileges over and above the other states of India. For example, the plenry power of parliament with respect to alteration of the name or territories of the State (Art.3) does not extend to the state. Similarly, International treaty or agreement affecting any part of the territory of the state (Art.253) doesn’t extend to Jammu and Kashmir. Article 253 empowers the Parliament to make any law for the whole or any part of the territory of India for implementing any treaty, agreement or convention with any other country or countries or any decision made at any international conference, association or other body. Any action of the Union Legislature or Union Executive which results in alteration of the name or territories or an international treaty or agreement affecting the disposition of any part of the territory of Jammu and Kashmir requires the consent of the State Legislature.

Emergency

·         Initially, Article 356 and 357 did not apply to India. However, these two articles related to suspension of the Constitutional machinery in the state have been extended to the state by the Amendment Order of 1964. However, Failure means failure of the constitution machinery as set up by the Constitution of the State and not the provisions in part VI of the Constitution of the India. As a result, where the failure of the Constitutional machinery takes place in Jammu & Kashmir, two types of Proclamation may be made

·         The President’s Rule under Art. 356 of the Indian Constitution (as in the case of the other States of the Indian Union)

·         The Governor under section 92 at the Constitution of J&K for which there is no counterpart in any other State of India.

·         The Union of India has no power to declare Financial Emergency under Article 360 in the state.

Fundamental Rights

·         Apart from the rights enjoyed by all states of India, some special right as regards employment, acquisition of property and settlement have been conferred on permanent resident of the State by constitution of Jammu and Kashmir. Right to property is still a fundamental right in the state.

DPSP & Fundamental Duties

·         Part IV (Directive Principles of the State Policy) and Part IVA (Fundamental Duties) of the Constitution are not applicable to J&K.

Amendment of the Constitution

·         The provisions of Art. 368 of the Constitution of India are not applicable for the amendment of the State Constitution of Jammu & Kashmir. The Jammu & Kashmir assembly by two third majority amend its own constitution (except in those matters that are related to relationship of the State with the Union of India)

·         The Union has no power to suspend the Constitution of J&K.

Jammu & Kashmir High Court

·         The High Court of J&K has limited powers as compared to other High Courts within India. It cannot declare any law unconstitutional. Unlike High Courts in other states, under Article 226 of the Constitution, it cannot issue writs except for enforcement of Fundamental Rights.

Amendment or abrogation of Article 370

Article 370(3) reads:

Notwithstanding anything in the foregoing provisions of this article, the President may, by public notification, declare that this article shall cease to be operative or shall be operative only with such exceptions and modifications and from such date as he may specify…Provided that the recommendation of the Constituent Assembly of the State referred to in clause (2) shall be necessary before the President issues such a notification“.

Now the question is that the J&K has no longer a constituent assembly. This poses a moot question if the article can be amended or removed by Indian parliament.  Some jurists say it can be amended by an amendment Act under Article 368 of the Constitution and the amendment extended under Article 370(1).

Demand for Abrogation of Article 370

The arguments in favour of and against the abrogation of article 370 are equally valid. Those who argue for abrogation of the article say that it has created certain psychological barriers and is root cause of all the problems. Moreover, Article 370 encourages secessionist activities in the country. It is also argued that at the time of enactment, it was a temporary arrangement which was supposed to erode gradually. This article is a constant reminder that Jammu and Kashmir is still to merge fully with India.

Those who argue against the article 370 say that the abrogation will cause serious consequences. They ask why there are separatist activities in other states which have not such special treatment by constitution. According to them, abrogation of this article would also violate the solemn undertaking by India given to state through the instrument of accession.

Special category status and the transfer of funds from Centre to states

What is Special Category Status?

Special Category Status is a classification that allows states to get significant level of resources necessary for development. This includes a change in the way funds are allocated to the states for planned development. Under Special Category Status, a state will typically receive 90% of funds as grants and10% as loans in the Centrally Sponsored Schemes (CSS). In contrast, other states typically receive 30% funds as loans and 70% as grants. There could be variations based on the scheme.

States which are under special category status

Of the 29 states in India, 11 states have been accorded Special Category Status Arunachal Pradesh Assam Manipur Meghalaya Mizoram Nagaland Sikkim Tripura, Jammu & Kashmir Himachal Pradesh and Uttarakhand.

ü  Other demands:

ü  Odisha, Bihar, AP and Telangana are demanding special category status to emerge out of poverty and infrastructural backwardness

4. Criteria for according the special category status, interalia: 

       1) Hilly and difficult terrain

       2) Low population density and or sizable share of tribal population

       3) Strategic location along borders with neighboring countries

       4) Economic and infrastructure backwardness

       5) Non-viable nature of state finances.

Conceptually, a state under special category has a low resource base that makes indigenous development improbable. Also, such a state is strategically located mandating a sustained level of development.

Who grants the status?

Special Category Status is accorded by National Development Council [NDC].

5. Demand of Special Category Status for Bihar has two components1. Changing the formula of cost sharing in Centrally Sponsored Schemes (CSS) such that share of the state is limited to 10% instead of 70% (as in most schemes).This will enable higher resource availability and greater borrowing power.1. Fiscal policy for equalizing differences in manufacturing and industrial sector and incentivizing private investment in the state. • Direct Tax Code for waiver of Income and Corporate taxes • In proposed GST, a provision for refund of Excise collected to new units set up in Bihar or the benefit of accelerated depreciation. This will help in rapidly industrializing the state. Bihar not only matches the criteria for Special Category Status but also demands a REVIEW of the criteria to incorporate the condition of economic and infrastructure

ü  There are twenty-nine states and seven union territories in India. Some of the states are given some benefits by the central government as they fall under the special category states. In 1969 while devising formula for sharing central assistance among states, the Fifth Finance Commission acting in line to the Gadgil formula, had accorded special status to three states on the basis of harsh terrain, backwardness and social problems prevailing in these states. As per Gadgil formula a special category state gets preferential treatment in federal assistance and tax breaks. The special-category states get significant excise duty concessions, and thus help these states attract large number of industrial units to establish manufacturing facilities within their territory. Now many other states have also been categorized under this term like:- Arunachal Pradesh, Assam, Himachal Pradesh, Jammu and Kashmir, Manipur, Meghalaya, Mizoram, Nagaland etc.

ü  Thus the main reason behind this categorization is the development of that particular state where there are many problems due to hilly terrains, international borders etc as there cannot be good industrial development and the finances of the state are also less, thus the centre government comes into picture. 90% of the central assistance is treated as grant and remaining 10% is considered as loan unlike other states which get 30% grant and 70% loan.

ü  The special category states have some distinct characteristics. They have international boundaries, hilly terrains and have distinctly different socio-economic developmental parameters. These states have also geographical disadvantages in their effort for infrastructural development. Public expenditure plays a significant role in the Gross State Domestic Product of the states. The states in the North-East are also late starters in development. In view of the above problems, central government sanctions 90 percent in the form of grants in plan assistance to the states in special category. The most important prescription for special category states is interest free loan with rationalization of public expenditure based on growth enhancing sectoral allocation of resources.

ü  For special category states unlike other states there is no hard budget constraint as the central transfer is high. Through the enactment of FRBM these states are also availing themselves of the benefit of debt swapping and debt relief schemes which facilitate reduction of the average annual rate of interest. There is a necessity of developing all these states at par with other states.

ü  This can only be possible if all these states are guided by the norms of inter-state equity based on fiscal efficiency. There are 12 states which fall under this category till now.

ü  The latest dispute regarding this is the issue that whether Bihar should also be given the status of special category state. The chief minister of Bihar Mr. Nitish Kumar has time and again made this demand because Bihar is economically backward and also falls on Indo- Nepal border. People in Bihar are adamant to get this status, but so far nothing has been done. Orissa, Chhattisgarh also have been demanding this status due to extreme poverty and also presence of Naxalites due to which no proper development can take place. The center has not at all responded to these demands and neither has the NDC (National Development Council)

ü  Thus I would like to conclude by saying that the formation and division of states on the basis of these parameters is very good as it helps those states which have low financial capacity to overcome their social, economic and other problems in such a good manner and this ultimately benefits the people of that region.

Special Category Status and Centre-state Finances

The concept of a special category state was first introduced in 1969 when the 5th Finance Commission sought to provide certain disadvantaged states with preferential treatment in the form of central assistance and tax breaks. Initially three states Assam, Nagaland and Jammu & Kashmir were granted special status but since then eight more have been included (Arunachal Pradesh, Himachal Pradesh, Manipur, Meghalaya, Mizoram, Sikkim, Tripura and Uttarakhand). The rationale for special status is that certain states, because of inherent features, have a low resource base and cannot mobilize resources for development. Some of the features required for special status are: (i) hilly and difficult terrain; (ii) low population density or sizeable share of tribal population; (iii) strategic location along borders with neighbouring countries; (iv) economic and infrastructural backwardness; and (v) non-viable nature of state finances.  The decision to grant special category status lies with the National Development Council, composed of the Prime Minster, Union Ministers, Chief Ministers and members of the Planning Commission, who guide and review the work of the Planning Commission.

In India, resources can be transferred from the Centre to states in many ways (see figure 1). The Finance Commission and the Planning Commission are the two institutions responsible for centre-state financial relations.

Figure 1: Centre-state transfers (Source: Finance Commission, Planning Commission, Budget documents, PRS)

Planning Commission and Special Category

[Note: These rules may undergo change in near future as NITI Aayog has replaced PC]

The Planning Commission allocates funds to states through central assistance for state plans. Central assistance can be broadly split into three components: Normal Central Assistance (NCA), Additional Central Assistance (ACA) and Special Central Assistance. NCA, the main assistance for state plans, is split to favour special category states: the 11 states get 30% of the total assistance while the other states share the remaining 70%.  The nature of the assistance also varies for special category states; NCA is split into 90% grants and 10% loans for special category states, while the ratio between grants and loans is 30:70 for other states.

For allocation among special category states, there are no explicit criteria for distribution and funds are allocated on the basis of the state’s plan size and previous plan expenditures. Allocation between non special category states is determined by the Gadgil Mukherjee formula which gives weight to population (60%), per capita income (25%), fiscal performance (7.5%) and special problems (7.5%).  However, as a proportion of total centre-state transfers NCA typically accounts for a relatively small portion (around 5% of total transfers in 2011-12).

Special category states also receive specific assistance addressing features like hill areas, tribal sub-plans and border areas. Beyond additional plan resources, special category states can enjoy concessions in excise and customs duties, income tax rates and corporate tax rates as determined by the government.  The Planning Commission also allocates funds for ACA (assistance for externally aided projects and other specific project) and funds for Centrally Sponsored Schemes (CSS). State-wise allocation of both ACA and CSS funds are prescribed by the centre.

The Finance Commission

Planning Commission allocations can be important for states, especially for the functioning of certain schemes, but the most significant centre-state transfer is the distribution of central tax revenues among states. The Finance Commission decides the actual distribution and the current Finance Commission have set aside 32.5% of central tax revenue for states. In 2011-12, this amounted to Rs 2.5 lakh crore (57% of total transfers), making it the largest transfer from the centre to states. In addition, the Finance Commission recommends the principles governing non-plan grants and loans to states.  Examples of grants would include funds for disaster relief, maintenance of roads and other state-specific requests.  Among states, the distribution of tax revenue and grants is determined through a formula accounting for population (25%), area (10%), fiscal capacity (47.5%) and fiscal discipline (17.5%).  Unlike the Planning Commission, the Finance Commission does not distinguish between special and non-special category states in its allocation.

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