Why in the news
NITI Aayog’s Fiscal Health Index (FHI) 2025 compared the budget health of 18 large states and sorted them into four performance groups.
Key facts
- The index looks at 18 major states, using measures such as spending, revenue, stability and share in GDP.
- Numbers come from the Comptroller and Auditor General (CAG); the scoring year is 2022-23.
- Odisha leads with an overall score of 678, a debt index of 990 and debt sustainability of 640.
- Achievers invest up to 4% of GSDP in capital and keep interest payments to about 7% of revenue receipts.
State groups
| Group | States | Main traits |
|---|
| Achievers | Odisha, Chhattisgarh, Goa, Jharkhand | Strong capital outlay, good non-tax revenue, revenue surplus, low interest burden |
| Front runners | Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, Karnataka | Developmental spending up to 73%, steady own-tax growth, debt-to-GSDP near 24% |
| Moderate performers | Tamil Nadu, Bihar, Rajasthan, Haryana | Fair results, but debt and expenditure management need work |
| Aspirational | Punjab, Andhra Pradesh, West Bengal, Kerala | Weak revenue, high deficits, rising debt, poor sustainability |
Problem areas named
- Kerala and Punjab: concern over expenditure quality and debt handling.
- West Bengal: weak revenue mobilisation and debt index.
- Andhra Pradesh: very high fiscal deficit. Haryana: poor debt profile.
About the sub-indices
| Sub-index | Ratios used |
|---|
| Quality of expenditure | Developmental spending / total spending; capital outlay / GSDP |
| Revenue mobilisation | Own revenue / GSDP; own revenue / total spending |
| Fiscal prudence | Gross fiscal deficit / GSDP; revenue deficit / GSDP |
| Debt index | Interest payments / revenue receipts; outstanding liabilities / GSDP |
| Debt sustainability | GSDP growth rate minus growth rate of interest payments |
- A positive gap in the sustainability measure signals manageable debt; a negative gap points to fiscal stress.
- Own revenue means state taxes plus non-tax income; a high ratio shows financial self-reliance.
Significance
- Higher rank means healthy finances, sustainable debt and efficient resource use; lower rank means big deficits and heavy borrowing.
- Differences between states highlight the need for targeted fiscal reforms in revenue and debt management.
Exam angle
- Publisher: NITI Aayog; data provider: CAG; states covered: 18.
- Top-ranked state overall: Odisha. Number of sub-indices: five.
- Related terms: GSDP, revenue deficit, gross fiscal deficit, capital outlay.