NITI Aayog’s Fiscal Health Index 2025 has ranked Indian states based on key fiscal parameters, highlighting the diverse fiscal health of the country’s regions. The index evaluates states’ revenue mobilisation, capital expenditure, debt sustainability, and fiscal prudence, offering a comprehensive view of each state’s economic health.
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Top performers
Among the top performers, Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat stand out for their strong fiscal management. These states have excelled in capital outlay, investing around 4% of their gross state domestic product (GSDP) into infrastructure and development. This, coupled with effective non-tax revenue mobilisation, has helped them maintain low interest payments — often around 7% of revenue receipts — while generating consistent revenue surpluses.
The front runners, including Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka, have shown strong performance in developmental expenditure, which constitutes roughly 73% of their total expenditure. These states also demonstrated balanced fiscal management with a stable tax revenue growth trajectory and strong debt sustainability, reflected by a debt-to-GSDP ratio of around 24%.
‘Performers’
In contrast, Tamil Nadu, Rajasthan, Bihar, and Haryana, categorised as performers, have managed to maintain a focus on developmental spending — around 70% of total expenditure. However, these states are grappling with rising debt levels and high-interest payouts, which now account for 16-20% of their revenue receipts. The increasing debt burden in these states has raised concerns over long-term fiscal sustainability.
Aspirational states
The aspirational states, namely Kerala, West Bengal, Andhra Pradesh, and Punjab, have struggled with low revenue mobilisation and fiscal deficit targets. These states face a growing debt burden and have been flagged for negative debt sustainability, which poses a significant risk to their fiscal health. The inability to generate sufficient revenue and control fiscal deficits has exacerbated their fiscal vulnerabilities.
The index aims to provide a clear picture of states’ fiscal health and help policymakers identify strengths and weaknesses in their fiscal management. By focusing on parameters such as quality of expenditure, fiscal prudence, revenue mobilisation, and debt sustainability, the index serves as a valuable tool to promote sound fiscal management across the country.
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(Edited by : Shoma Bhattacharjee)
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