The NITI Aayog has introduced the second annual “Fiscal Health Index” to assess the fiscal performance of Indian states comprehensively. This data-driven framework aims to evaluate fiscal soundness, guide reforms, and promote evidence-based fiscal policy making. With global public finances facing pressure, maintaining robust fiscal management at all government levels is crucial for macroeconomic stability and long-term development.
The Fiscal Health Index focuses on the significant role of state governments in India’s fiscal structure. As states account for a third of the country’s general government debt, their fiscal trajectory is vital for national fiscal sustainability. By systematically assessing state finances, the Index aims to ensure fiscal discipline, efficient resource allocation, and macroeconomic stability in the long run.
The latest edition of the Fiscal Health Index has broadened its scope to include the northeastern and Himalayan states, in addition to the 18 major states. This expansion aims to provide a more inclusive and diverse representation of India’s fiscal landscape. Notably, the Index ranks the northeastern and Himalayan states separately to consider regional structural differences.
The analysis of fiscal outcomes across states reveals varying performances. While most major states showed moderate Fiscal Health Index scores in 2023-24 compared to the previous year, the northeastern and Himalayan states also displayed diverse fiscal performances. The report underlines key policy priorities to enhance fiscal health, including revenue mobilization, rationalizing expenditures, improving capital expenditure quality, and adopting medium-term fiscal planning frameworks.
