States handle two-thirds of public spending and one-third of revenue, managing key development and infrastructure roles, making their fiscal health crucial for national progress.
Key findings of Fiscal Health Index (FHI) 2025
- Top Performing States: Odisha excels in fiscal health with the highest overall index score topping the Debt Index and Debt Sustainability rankings.
- Aspirational States: These states face significant fiscal challenges, such as low quality of expenditure, debt sustainability, and revenue mobilization issues.
- Revenue Mobilization: Goa, Telangana, and Odisha lead in revenue mobilization.
- Capital Expenditure: Achiever and Front Runner states allocate around 27% of their Developmental Expenditure to Capital Expenditure, in contrast, Performer and Aspirational States allocate only around 10%.
- Debt Sustainability: States like West Bengal and Punjab have growing debt burdens, raising concerns about debt sustainability.
About Fiscal Health Index (FHI) 2025
- Purpose: Evaluates state fiscal health to promote balanced regional development and economic stability.
- Assessment: Fiscal health of 18 major States,
- Based on five key sub-indices: Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability.
- Significance of FHI:
- Fiscal Health Framework: Aids in fiscal consolidation, transparency, and resource management.
- National Vision Alignment: Supports “Viksit Bharat @2047” with state-level fiscal discipline central to India’s economic transformation.
