Odisha, Chhattisgarh, and Goa were recognised as top-performing states in the inaugural Fiscal Health Index (FHI) 2025, released by NITI Aayog on January 24, 2025. The report assesses the fiscal performance of 18 major Indian states for the year 2022-23, considering their contributions to India’s GDP, public expenditures, revenues, and overall fiscal stability.

The mineral-rich states of Odisha and Chhattisgarh, along with Goa and Jharkhand, secured the highest ranks in the ‘Achievers’ category. These states demonstrated robust fiscal management, revenue generation, and low debt burdens. Odisha emerged as the best performer with a commendable overall index score of 67.8, reflecting its prudent fiscal policies.

The report highlighted the stark contrast between the achievers and the struggling states. Punjab, Andhra Pradesh, West Bengal, and Kerala were listed under the ‘Aspirational’ category due to significant fiscal challenges. These states face mounting debt burdens, low revenue mobilization, and difficulty in meeting fiscal deficit targets, raising concerns over debt sustainability.

Key Findings of the Report

The Fiscal Health Index 2025, launched by Arvind Panagariya, Chairman of the 16th Finance Commission, offers insights into the fiscal stability and sustainability of Indian states. The assessment is based on critical parameters like capital outlay, revenue surplus, debt-to-GSDP ratio, and expenditure quality.

Achiever States

Odisha, Goa, Chhattisgarh, Jharkhand, and Karnataka led the rankings due to:

• Higher Capital Outlay: Up to 4% of Gross State Domestic Product (GSDP).
• Revenue Surplus: A result of effective non-tax revenue mobilization.
• Low Interest Payments: Constituting less than 7% of revenue receipts.
• Debt Management: Achieving sustainable debt-to-GSDP ratios and maintaining low fiscal deficits.

Odisha stood out with top scores in the Debt Index (99.0) and Debt Sustainability (64.0), along with an above-average capital outlay-to-GSDP ratio.

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Front-Runners and Performers

States like Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka were categorized as ‘Front-Runners’, showcasing:

• High developmental expenditure (up to 73% of total expenditure).
• Consistent growth in own tax revenue.
• Improved fiscal management and debt sustainability with an average debt-to-GSDP ratio of 24%.

Tamil Nadu, Bihar, Rajasthan, and Haryana were listed as ‘Performers’, demonstrating moderate fiscal stability and scope for improvement.

Aspirational States

Punjab, Kerala, West Bengal, and Andhra Pradesh were flagged for fiscal vulnerabilities:

• High fiscal deficits and growing debt burdens.
• Challenges in revenue mobilization and expenditure quality.
• Weak debt sustainability, posing risks to long-term fiscal health.

Insights and Implications

The report serves as a critical tool for policymakers to evaluate and address fiscal disparities among states. It underscores the importance of fiscal discipline, balanced expenditure, and effective revenue mobilization for sustainable economic growth.

Data for the Fiscal Health Index was sourced from the Comptroller and Auditor General (CAG), ensuring a comprehensive analysis of fiscal trends from 2014-15 to 2021-22. States like Odisha, Goa, Karnataka, Maharashtra, and Chhattisgarh consistently achieved high average scores during this period. The findings emphasize the need for underperforming states to adopt structural reforms and prudent fiscal strategies to improve their financial health. Meanwhile, the achievers set a benchmark for fiscal governance, driving India’s economic progress.

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