''Special Status'' and '' Special Category Status'' to States in India

Special Status is guaranteed by the Constitution of India through an Act passed by the two-third majority in both houses of the Parliament, as in the case of Jammu and Kashmir, whereas Special Category Status is granted by the National Development Council(NDC), an administrative body of the government. 

While Special Status empowers legislative and political rights, Special Category Status deals only with economic, administrative and financial aspects

At present there are 11 States that enjoy Special Status and Special Category Status

• Arunachal Pradesh
• Assam
• Himachal Pradesh
• Jammu and Kashmir
• Manipur
• Meghalaya
• Mizoram
• Nagaland
• Sikkim
• Tripura and 
• Uttarakhand

The NDC bestows Special Category Status based on certain parameters such as low resource base, hilly and difficult terrain, low population density or sizeable share of tribal population and strategic (hostile) location

Planning Commission and Special Category

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%).

Origin
The concept of a special category state was first introduced in 1969. The 5th Finance Commission decided 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.
Conditions to categorize states for special status :
The special status is given to certain states because of their inherent features; like they might 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 sizable share of tribal population;
(iii) strategic location along borders with neighboring countries;
(iv) economic and infrastructural backwardness; and
(v) non-viable nature of state finances.
Who gets to decide to grant the status:
The decision to grant special category status lies with the National Development Council, composed of the Prime Minister, Union Ministers, Chief Ministers and members of the Planning Commission, who guide and review the work of the Planning Commission. Since this has to deal with funds transfer from Centre to state, the two bodies involved at the core are Planning Commission and Finance Commission. Below is an interesting split up of their respective roles and brief calculations that is done by them.
Planning Commission and Special Category
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)
Special Central Assistance