Fiscal Health Index 2025 (FHI)

Objectives :

• To provide a comparative analysis of fiscal healthacross Indian states through standardized metrics.
• To identify areas of strength and concernin states’ fiscal management practices.
• To promote transparency, accountability, and prudent fiscal managementthrough empirical assessment.
• To assist policymakers in making informed decisionsaimed at enhancing fiscal sustainability and resilience.

Salient Points

• Issuing Authority: NITI Aayog
• Scope of Analysis: The FHI analysis covers eighteen major states that drive the Indian economy in terms of their contribution to India’s GDP, demography, total public expenditure, revenues, and overall fiscal stability.
• Data Source: The composite Fiscal Health Index has been developed using data from the Comptroller and Auditor General of India (CAG), covering the Financial Year 2022-23.
• Measurement: The index is predicated upon five broad categories:
  1. Revenue Generation and Mobilization: Assessment of states’ own revenue receipts, tax buoyancy, and non-tax revenue generation.
  2. Expenditure Management and Prioritization: Evaluation of efficiency in expenditure allocation, prioritization of capital expenditure, and adherence to fiscal discipline.
  3. Debt Management: Analysis of states’ debt-to-GSDP ratios, interest payment burdens, and overall sustainability of debt portfolios.
  4. Fiscal Deficit Management: Measurement of states’ fiscal deficit as a percentage of Gross State Domestic Product (GSDP) and adherence to statutory limits.
  5. Overall Fiscal Sustainability: Composite analysis of revenue, expenditure, deficit, and debt indicators to gauge long-term fiscal health.

Key Findings

• Rankings:
  • First Place: Odisha (Highest Score: 67.8)
  • Second Place: Chhattisgarh (55.2)
  • Third Place: Goa (53.6)
  • Last Place (18th): Punjab (10.7)
  • Rajasthan’s Rank: Rajasthan secured the 12th position with a score of 28.6.
• Top Performers: Odisha, Chhattisgarh, and Goa excel in Debt Index, Debt Sustainability, and Revenue Mobilization.
• Revenue Mobilization: Odisha, Jharkhand, Goa, and Chhattisgarh effectively mobilize non-tax revenue (average 21% of Total Revenue).
• Aspirational States: Punjab, Andhra Pradesh, West Bengal, Kerala face fiscal challenges like poor debt sustainability and high deficits.
• Capital Expenditure: High allocation (27%) by Odisha, Goa, Madhya Pradesh, Karnataka, Uttar Pradesh; Low allocation (10%) by West Bengal, Andhra Pradesh, Punjab, Rajasthan.
• Debt Concerns: West Bengal and Punjab face growing debt burdens and increasing debt-to-GSDP ratios.