In January 2025, Dr. Arvind Panagariya, Chairman of 16th Finance Commission (FC) launched the inaugural issue of National Institution for Transforming India (NITI) Aayog’s report titled ‘Fiscal Heath Index (FHI) 2025 for the Financial Year 2022-23 (FY23)’ in New Delhi, Delhi.
- As per the report, Odisha has outperformed all other states with cumulative score of 67.8 out of 100, followed by Chhattisgarh (55.2) and Goa (53.6).
- The report mentioned that Odisha, Chhattisgarh, Goa and Gujarat have consistently been the top-performing states across time periods considered in the study.
About Fiscal Heath Index (FHI) 2025:
i.The report provides a comprehensive evaluation of the fiscal health of 18 major Indian states that drive the Indian economy in terms of their contribution to India’s Gross Domestic Product (GDP), demography, total expenditure, revenues, and overall fiscal stability.
- It also provides in-depth information about state-specific challenges and areas for improvement.
ii.The report ranked states based on 5 key sub-indices such as: Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability.
iii.The report has sourced data from the Comptroller and Auditor General (CAG) of India to calculate the FHI of states.
Classification of States:
i.The report has classified the states into 4 main categories based on their composite score: Achiever(FHI Score>50), Front Runner(FHI Score: 40-50), Performer(FHI Score:25-40) and Aspirational(FHI Score ≤25).
ii.States in Achiever category: Odisha (rank 1st ), Chhattisgarh (2nd), Goa (3rd), Jharkhand(rank 4th with overall score of 51.6) and Gujarat (rank 5th overall score of 50.5).
- The report mentioned that these top 5 achiever states have higher capital outlay of up to 4% of Gross State Domestic Product (GSDP), effective mobilization of non-tax revenue, are revenue surplus and have low interest payments, which is maximum 7% of revenue recipients.
iii.States in Front-runner category: Maharashtra (50.3); Uttar Pradesh (UP) (45.9); Telangana (43.6); Madhya Pradesh (MP) (42.2); and Karnataka (40.8)
- The report mentioned that front-runner states reported high total developmental expenditure of up to 73%, saw consistent growth in own tax revenue, had balanced fiscal management and improved debt sustainability with debt-to-GSDP ratio of 24%.
iv.States in Performer category: Tamil Nadu (TN) (29.2); Rajasthan (28.6); Bihar (27.8) and Haryana (27.4)
v.States in Aspirational category: Kerala (25.4), West Bengal (WB)(21.8), Andhra Pradesh (AP) (20.9) and Punjab (10.7)
- As per the report, states in this category are the worst performers with lowest composite FHI score compared to other states.
- It has also highlighted that these states are struggling to meet the fiscal and revenue deficit targets, have low revenue mobilization, increasing debt burden with debt sustainability a concern in these states.
Top 3 states in FHI 2025:
| Category | Top 3 States |
|---|---|
| Achiever | 1.Odisha 2.Chhattisgarh 3.Goa |
| Front-runner | 1.Maharashtra 2.Uttar Pradesh (UP) 3.Telangana |
| Performer | 1.Tamil Nadu (TN) 2.Rajasthan 3.Bihar |
| Aspirational | 1.Kerala 2.West Bengal (WB) 3.Andhra Pradesh (AP) |
Key Findings:
i.Among the 5 key sub-indices of the report, Odisha has topped the debt index (99.0) and debt sustainability (64.0) rankings with better than average scores under Quality of Expenditure (52) and Revenue Mobilisation (69.9).
- The report outlined certain factors responsible for good fiscal health of state Odisha are: low fiscal deficits, a good debt profile, and an above average capital outlay or GSDP ratio.
ii.According to the report, Jharkhand has shown improvement in its fiscal health. It has improved its ranking from 10th position (in the period of 2015-19 to 2021-22) to 4th position (in 2022-23).
- This improvement is mainly attributed to better revenue mobilization, enhanced fiscal prudence, and stronger debt sustainability.
iii.The report observed that most South Indian states have performed poor in managing their finances. It has specifically highlighted 3 southern states i.e. AP, Kerala and TN, which have performed worse in the rankings as they scored below 30 out 100.
- Also, Karnataka witnessed a drop in its rankings, from 3rd (in 2014-15 to 2021-22) to 10th (in the period of 2015-19 to 2021-22), mainly due to subdued performance under Quality of Expenditure and Debt Sustainability.
iv.The report noted that among states placed in ‘aspirational’ category, Kerala and Punjab struggled with low quality of expenditure and debt sustainability while, WB faces revenue mobilization and debt index issues.
- It further highlighted AP has high fiscal deficit and Haryana has a poor debt profile.
About National Institution for Transforming India (NITI) Aayog:
Chief Executive Officer (CEO) – B.V.R. Subrahmanyam
Headquarters- New Delhi, Delhi
Established – 2015
