Fiscal Health Index (FHI) 2025 Report, Check Top10 Best Performing States

Context: NITI Aayog’s inaugural Fiscal Health Index report 2025 was released by the Chairman of the 16th Finance Commission, Dr. Arvind Panagariya.

About Fiscal Health Index (FHI)

• Fiscal Health Index (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.

Objectives of the Fiscal Health Index

• To give a comparative evaluation of state fiscal health in India using normalised measures.
• To determine areas of strength and concern in states’ fiscal management practices.
• To encourage transparency, accountability, and responsible fiscal management through empirical evaluation.
• To support policymakers in making well-informed decisions focused on improving fiscal sustainability and resilience.

State-wise Fiscal Health Index 2025 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.

Top-10 Best Performing States in the Fiscal Health Index 2025

According to the Fiscal Health Index 2025 report published by NITI Aayog, the following are the top 10 performing states in India according to their fiscal performance during the financial year 2022-23:

Conclusion

The Fiscal Health Index 2025 provides an excellent instrument to measure the fiscal performance of Indian states. It emphasises the imperative of ongoing surveillance, sound fiscal discipline, and pre-emptive action towards improving states’ fiscal health. The Index strongly emphasises the roles of revenue generation, effective spending management, management of debt, and compliance with fiscal deficit ceilings for overall fiscal sustainability.

The FHI report has been circulated to all States/UTs so that they can assess their own fiscal performance based on major indicators. States are urged to undertake sustainable fiscal behaviours appropriate to their economies and move towards fiscal prudence by taking a proper state-level intervention

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