NITI Aayog launches the "Fiscal Health Index 2025"

The report also highlights state-specific challenges and areas for improvement.

- Madhusudhanan S

This article briefly discusses report and analyzes its findings on Tamil Nadu and West Bengal.

On January 24, 2025, NITI Aayog launched the inaugural issue of its "Fiscal Health Index (FHI) 2025." The report offers a comprehensive assessment of the fiscal health of 18 major states, based on five key sub-indices: Quality of Expenditure, Revenue Mobilization, Fiscal Prudence, Debt Index, and Debt Sustainability. It also provides insights into state-specific challenges and areas that need improvement.

During the launch, Dr. Panagariya, Chairman of the 16th Finance Commission, emphasized the importance of states maintaining stable fiscal paths to promote balanced regional development, long-term fiscal sustainability, and effective governance. He noted that the FHI offers a systematic approach to measuring fiscal performance at the state level, while providing valuable insights into broader fiscal trends.

This, he stated, would help deepen the understanding of fiscal health across the country, ultimately contributing to fiscal health and long-term growth.

The FHI aims to clarify the fiscal status at the sub-national level and guide policy reforms to achieve sustainable and robust economic growth. The report ranks states according to a comprehensive fiscal index based on the five subindices.

Key Findings: Odisha ranks first among the 18 largest states, with a score of 67.8, followed by Chhattisgarh and Goa at 55.2 and 53.6, respectively. These leading states exhibit strong fiscal health, excelling in revenue mobilization, expenditure management, and debt sustainability. Improvements are also noted in states like Jharkhand, which has strengthened fiscal prudence and debt sustainability. However, Karnataka faces challenges due to weaker performance in expenditure quality and debt management. These interstate disparities underscore the need for targeted reforms to address specific fiscal challenges and promote sustainable growth.