First Fiscal Health Index (FHI) report

The NITI Aayog, a central-government think tank, released its first Fiscal Health Index (FHI) report, highlighting the fiscal health of 18 Indian states, excluding special-category states. These states contribute 85% of the cumulative GDP of all states.

Top Performing States

• Odisha
  • Leads with an overall index score of 67.8.
  • Ranks first in Debt Index (99.0) and Debt Sustainability (64.0).
  • Maintains low fiscal deficits and a strong debt profile with a high Capital Outlay/GSDP ratio.
• Chhattisgarh
  • High performance in Revenue Mobilization due to significant mining revenue.

Aspirational States

• Includes Andhra Pradesh, Punjab, West Bengal, and Kerala.

Key Indices and Performance

• Quality of Expenditure
  • Calculated by the ratio of developmental expenditure to total state expenditure and capital outlay to GSDP.
  • Uttar Pradesh and Bihar show good scores but underperform in Revenue Mobilization.
• Debt Sustainability
  • Karnataka ranks among aspirational states despite good performance in other indices.
  • Chhattisgarh ranks lower compared to some other states.

Concerns and Recommendations

• West Bengal and Punjab
  • Increased debt burdens and high debt-to-GDP ratios raise concerns about debt sustainability.
  • West Bengal's interest payments constitute 20.47% of revenue receipts, affecting development allocation.
  • Recommendations include fiscal discipline and enhanced revenue mobilization.
• Kerala
  • Suggestions include enhancing revenue mobilization, optimizing resources, and rationalizing expenditures.