NITI Aayog’s First Fiscal Health Index (FHI) Report

Check here the Fiscal Health Index (FHI) Report, analyzing the economic stability, fiscal performance, and financial resilience of states and regions in a comprehensive review.

Table of Contents

Context: NITI Aayog’s inaugural Fiscal Health Index report was released by the Chairman of the 16th Finance Commission, Dr. Arvind Panagariya.

About Fiscal Health Index (FHI)

FHI aims to evaluate the fiscal health of Indian States based on key financial parameters, providing insights into their fiscal stability, revenue generation and expenditure quality.
FHI assesses states using five sub-indices – Quality of Expenditure, Revenue Mobilization, Fiscal Prudence, Debt Index and Debt Sustainability.
Scope: Covers 18 major States contributing significantly to India’s GDP, demography, and public expenditure.

Categories of States in the Fiscal Health Index Report

Achievers (Top-performing States)

Odisha, Chhattisgarh, Goa and Jharkhand.

Capital Outlay: Up to 4% of Gross State Domestic Product (GSDP).
Revenue Surplus: Effective non-tax revenue mobilization.
Low Interest Payments: Only up to 7% of revenue receipts.
Top State: Odisha with the highest overall index score of 67.8.
Debt Rankings: Odisha topped both Debt Index (99.0) and Debt Sustainability (64.0)

Front-runners

Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, Karnataka.

Developmental Expenditure: High at 73% of total expenditure.
Tax Revenue Growth: Consistent growth in own tax revenue.
Fiscal Management: Balanced fiscal management with an improved debt-to-GSDP ratio of 24%.

Performers

Tamil Nadu, Bihar, Rajasthan, and Haryana.

Moderate performance with some fiscal management challenges.

Aspirational States (Worst-performing States)

Punjab, Andhra Pradesh, West Bengal, and Kerala.

Low Revenue Mobilization: Struggling to meet fiscal and revenue deficit targets.
Debt Issues: Witnessing a growing debt burden, with debt sustainability a significant concern.
State-specific Issues:
- Kerala and Punjab: Poor quality of expenditure and weak debt sustainability.
- West Bengal: Low revenue mobilization and issues with debt index scores.
- Andhra Pradesh: High fiscal deficits.