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January 26, 2025 – Odisha, Chhattisgarh, and Goa emerged as top-performing states in the inaugural Fiscal Health Index (FHI) 2025, released by NITI Aayog on January 24. The report evaluated the fiscal performance of 18 major Indian states for the financial year 2022-23, focusing on their contributions to India’s GDP, public expenditures, revenues, and overall fiscal stability.
The mineral-rich states of Odisha and Chhattisgarh, along with coastal Goa and Jharkhand, secured top spots in the ‘Achievers’ category, reflecting their strong fiscal management, effective revenue generation, and minimal debt burdens. Odisha stood out as the best performer with an impressive overall index score of 67.8, demonstrating exemplary fiscal discipline.
Key Findings of the Fiscal Health Index 2025
The FHI, unveiled by Arvind Panagariya, Chairman of the 16th Finance Commission, offers a comprehensive assessment of state fiscal health based on parameters such as capital outlay, revenue surplus, debt-to-GSDP ratio, and expenditure quality.
Achievers Category
The top-ranking states displayed:
- Higher Capital Outlay: Up to 4% of Gross State Domestic Product (GSDP).
- Revenue Surplus: Achieved through efficient non-tax revenue mobilization.
- Low Interest Payments: Constituting less than 7% of revenue receipts.
- Sustainable Debt Management: Achieving low debt-to-GSDP ratios and maintaining fiscal deficits within permissible limits.
Odisha led with stellar scores in the Debt Index (99.0) and Debt Sustainability (64.0), while also maintaining an above-average capital outlay-to-GSDP ratio.
Front-Runners and Performers
States such as Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka were categorized as ‘Front-Runners’, showcasing:
- High developmental expenditure (up to 73% of total outlay).
- Growth in tax revenue.
- Improved fiscal management and debt sustainability with an average debt-to-GSDP ratio of 24%.
Meanwhile, Tamil Nadu, Bihar, Rajasthan, and Haryana were listed as ‘Performers’, demonstrating moderate fiscal stability but room for improvement.
Aspirational States
The report flagged Punjab, Kerala, West Bengal, and Andhra Pradesh under the ‘Aspirational’ category due to significant fiscal challenges:
- High fiscal deficits and rising debt burdens.
- Weak revenue mobilization and poor expenditure quality.
- Concerns over debt sustainability, posing risks to long-term fiscal health.
Implications and Insights
The Fiscal Health Index serves as a crucial policy tool to address fiscal disparities among Indian states. It highlights the importance of balanced public expenditure, fiscal discipline, and effective revenue strategies for sustainable growth.
Odisha, Goa, Karnataka, Maharashtra, and Chhattisgarh consistently achieved high scores, setting benchmarks for fiscal governance. In contrast, struggling states were urged to implement structural reforms to improve fiscal management and debt sustainability.
The data for this assessment was sourced from the Comptroller and Auditor General (CAG), covering fiscal trends from 2014-15 to 2021-22. The report underscores the need for underperforming states to adopt prudent fiscal policies, while top-ranking states pave the way for a more stable and equitable fiscal future.
Disclaimer: This article is based on the Fiscal Health Index 2025 report by NITI Aayog and data from the Comptroller and Auditor General (CAG). While all efforts have been made to ensure accuracy, readers are advised to consult the official report for detailed insights.
