Fiscal Health Index 2026: NITI Aayog Ranks States, Odisha First

Why in the news

NITI Aayog published the second yearly round of its Fiscal Health Index, scoring Indian states on their 2023-24 finances. Odisha stayed on top.

Key facts

• Framework: the Fiscal Health Index (FHI) compares states on sustainability, revenue strength and debt management rather than deficits alone.
• Period assessed: FY 2023-24; edition: second.
• Leader: Odisha, helped by steady revenues, controlled deficits and sound fiscal management.
• Coverage widened to 10 North-Eastern and Himalayan states; Arunachal Pradesh topped this group.
• Many states are tilting spending toward capital outlay and social sectors.

Five pillars

1. Quality of Expenditure – developmental and capital spending against committed spending.
2. Revenue Mobilisation – ability to raise own tax and non-tax revenue.
3. Fiscal Prudence – deficit handling and adherence to FRBM Act norms.
4. Debt Index – size and burden of outstanding liabilities.
5. Debt Sustainability – long-run capacity to service debt without stress.

Rankings, FY 2023-24

Concerns

• Committed spending: salaries, pensions and interest crowd out development; in Punjab it hit 80% of revenue receipts in FY24.
• Weak own revenue: Bihar’s own revenue is under one-third of its receipts.
• Deficit breach: Andhra Pradesh’s fiscal deficit was 4.35% of GSDP, above the FRBM ceiling.
• Interest load: West Bengal uses over 20% of revenue receipts on debt servicing.
• Terrain: Himachal Pradesh faces costly infrastructure because of mountains.
• Punjab, Kerala and West Bengal also show high debt, rising deficits and slower revenue growth.

Exam angle

• Publisher: NITI Aayog; top state: Odisha (73.1).
• Number of pillars: five.
• State finances are about one-third of general government debt, so they matter for national stability.