India's Top 10 Best Performing States in the Fiscal Health Index 2025

Fiscal Health Index 2025, developed by NITI AYOG, was recently released by Arvind Panagariya, Chairman of the 16th Finance Commission on 24 January. The Fiscal Health Index is a comprehensive assessment of the fiscal performance of India’s 18 major states based on five subindices: Expenditure quality, Revenue mobilization, Fiscal prudence, Debt index, and Debt sustainability.

This index used data from the Comptroller and Auditor General (CAG) for the financial year 2022-2023.

After a thorough assessment and evaluation of the performance of various states, the FHI seeks to encourage the implementation of effective fiscal management strategies. The target of this index is to raise fiscal discipline at the state level, thus contributing to the nation’s broader economic objectives.

The FHI serves several important purposes:

1. Policy Guidance: It assists policymakers by providing insights into state fiscal health and identifying areas requiring improvement.

2. Encouraging Best Practices: By thoroughly evaluating and highlighting the performance of different states, the FHI aims to promote adopting fiscal management strategies.

3. Comprehensive Assessment: The index offers a systemic approach to assess states’ fiscal health, facilitating comparisons and benchmarking against best practices.

4. Annual Publication: The FHI will be published annually, allowing for tracking of fiscal performance over time.

Top Performers

These states demonstrate strong fiscal health, excelling in revenue mobilization, expenditure management, and debt sustainability

1. ODISHA (FHI score:67.8)

2. CHATTISGARH (FHI score:55.2)

3. GOA ( FHI score:53.6)

4. JHARKHAND (FHI score:51.6)

5. GUJARAT(FHI score:50.5)

Aspirational States

These states face fiscal challenges, including high debt, large interest payments, weak revenue generation, and inefficiencies in capital expenditure. They are Haryana, Kerala, West Bengal, Andhra Pradesh, Punjab.

Even so, the state performance varies across the five categories. For example, Uttar Pradesh and Bihar have good scores under Quality of Expenditure, but they rank lower in Revenue Mobilization. Karnataka performs well in most of the indices, but it ranks amongst the three aspirational states in Debt Sustainability.

 The FHI framework developed by the Economics and Finance team for assessing state finances will serve as a valuable tool to promote transparency, track progress, and address fiscal challenges effectively.

Reference:

1. NITI Aayog. Fiscal Health Index 2025. January 24, 2025. Accessed February 2, 2025. https://www.niti.gov.in/sites/default/files/2025-01/Fiscal_Health_Index_24012025_Final.pdf.

(Input from various sources)

(Rehash/Dr. Ansila S/MSM)