Context: The Fiscal Health Index (FHI), released by NITI Aayog provides a comprehensive evaluation of the fiscal health of India's states. This report for the financial year 2022-23 covers 18 major states that contribute significantly to India’s economy, focusing on their public expenditure, revenues, debt sustainability, and overall fiscal stability. 

• The initiative aims to assess and benchmark fiscal performance across states, helping to identify areas for improvement and best practices that can be adopted for better fiscal management.

Key highlights of the FHI Report

• Top Performers: Odisha, Chhattisgarh, Goa, and Jharkhand were ranked as the best-performing states, with Odisha topping the list due to its high capital outlay, effective revenue mobilization, and low interest payments. These states have a revenue surplus and strong fiscal management.

These States exhibited:

• Capital outlay of up to 4% of Gross State Domestic Product (GSDP).

• Effective mobilisation of non-tax revenues.

• Revenue surplus and low interest payments (up to 7% of revenue receipts).

• Aspirational States: States like Punjab, Andhra Pradesh, West Bengal, and Kerala are struggling with fiscal challenges. These states face issues such as low revenue mobilization, high debt burden, and difficulties in meeting fiscal and revenue deficit targets.

• Front-Runners: Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka were categorized as front-runners for fiscal health. These states demonstrated high developmental expenditure, consistent revenue growth, and improved debt sustainability.

• Fiscal Indicators: States like Odisha, Goa, Karnataka, Maharashtra, and Chhattisgarh scored highest in the FHI over the 2014-15 to 2021-22 period, showcasing stable fiscal management and strong debt profiles.

• Debt Sustainability: Odisha was recognized for its excellent debt sustainability with the highest scores in Debt Index (99.0) and Debt Sustainability (64.0).

Fiscal Health Index

• NITI Aayog’s “Fiscal Health Index 2025” evaluates the fiscal health of Indian states.

• Sub-Indices Used: The FHI report evaluates 18 major states based on five critical sub-indices:

1. Quality of Expenditure

2. Revenue Mobilization

3. Fiscal Prudence

4. Debt Index

5. Debt Sustainability

• These sub-indices together provide a detailed, multi-dimensional view of a state’s fiscal health.

• Data for the Fiscal Health Index was sourced from the Comptroller and Auditor General (CAG).

• The FHI is designed to assist policymakers by offering insights into states’ fiscal health and helping identify areas requiring intervention and strategic planning.