India’s 18 major states can now evaluate their fiscal performance through the NITI Aayog’s newly launched Fiscal Health Index (FHI) 2025. NITI Aayog uses the index to direct reforms supporting sustainable economic development while building fiscal standards among states. NITI Aayog’s Fiscal Health Index (FHI) for 2022-23 produced Odisha, Chhattisgarh, Goa and Gujarat and Jharkhand as the five states in best fiscal condition.
How do we define the Fiscal Health Index (FHI)?
NITI Aayog developed the FHI (Fiscal Health Index) as a combined assessment tool to analyze Indian states’ financial stability. It measures the financial stability and efficiency of state governments by assessing five key sub-indices:
-
Quality of Expenditure: The index evaluates state funds distribution efficiency.
-
Revenue Mobilization: The index evaluates whether states manage to successfully collect revenue from sources.
-
Fiscal Prudence: The index shows how states maintain strong financial management combined with responsibility assurance.
-
Debt Index: Looks at the level of debt concerning the state’s economy and fiscal capacity.
-
Debt Sustainability: A state demonstrates debt management sustainability through this metric.
Using both the Comptroller and Auditor General of India (CAG) fiscal year 2022-23 reports and past FHI data from 2014-15 through 2021-22 the assessment takes place.
Key Highlights of FHI 2025:
Top Performers:
-
Odisha: The state received the highest score of 67.8 and performed outstandingly in debt management alongside debt sustainability.
-
Chhattisgarh: The state demonstrates robust fiscal management according to its score of 55.2 which secured second place in the ranking.
-
Goa: Fiscal balance stands out through its position at rank 3 and its obtained score of 53.6.
-
“Achievers” Category: Multiple fiscal metrics demonstrate strong performance results in these states which position them as exemplars of best practices.
-
“Front Runners” and “Performers”: The “Front Runner” label went to Maharashtra and Uttar Pradesh alongside Telangana and Madhya Pradesh and Karnataka but the “Performer” tag was given to Tamil Nadu alongside Rajasthan as well as Bihar and Haryana. The results showed that Kerala together with West Bengal and Andhra Pradesh and Punjab earned “Aspirational” status because they stood in need of substantial enhancement.
Underperformers:
-
Kerala: Kerala represented the lowest performer according to FHI 2025 with a score of 29.7 as it experiences difficulties maintaining debt sustainability while also facing downward pressure on expenditure quality.
-
Punjab: The state achieved a score of 28.4 although it demonstrated poor mobilization in revenue alongside high deficit problems.
-
West Bengal: Score 27.8 while at the same time struggling with debt index performance and fiscal resource management systems.
-
Andhra Pradesh: The state performed poorly since its high fiscal deficits lowered its total score to 26.9.
Regional Insights:
Southern States: Telangana emerges as the highest performing state scoring 47.5 while neighboring Tamil Nadu (30.2), Kerala (29.7), and neighboring Andhra Pradesh (26.9) face escalating fiscal problems.
Significance of FHI:
-
Comprehensive Insights: FHI reveals state fiscal conditions by showing their best points along with necessary improvement areas.
-
Annual Report: NITI Aayog plans to publish FHI on an annual basis starting from fiscal year 2024-25 until its following releases. Cost assessment data through FHI permits authorities to develop fiscal strategies that address emerging patterns in financial health.
-
Guiding Fiscal Reforms: The report underlines the need to develop careful financial systems while building better tax enforcement and focusing investments for maintaining long-term fiscal stability.
Implications for Policy and Governance:
-
Balanced Fiscal Growth: For ongoing national sustainability both in terms of geographic equality and fiscal stability the FHI report identifies balance as essential.
-
Informed Decision-Making: Through its data-driven analysis the FHI facilitates policy decisions by highlighting key areas for improvement that guide future policy structures aimed at fiscal health enhancement.
Conclusion
The 2022-23 NITI Aayog Fiscal Health Index demonstrates critical use in state fiscal assessment by showing Odisha, Chhattisgarh, and Goa as exemplary performers. Through FHI policymakers gain vital knowledge to pursue financial reforms that build transparency while maintaining sustainable economic expansion in India.
