The Fiscal Health Index (FHI) 2025, an annual report published by NITI Aayog, provides a detailed evaluation of the fiscal health of Indian states. Designed to offer data-driven insights, the FHI aims to improve fiscal governance and strengthen economic resilience across the country. By highlighting the strengths and weaknesses of fiscal management at the state level, the report lays the groundwork for better policy interventions.
Key Features of the Fiscal Health Index (FHI)
The FHI 2025 assesses the fiscal health of 18 major states through a composite index derived from five critical sub-indices:
- Quality of Expenditure – Evaluates the efficiency of state spending.
- Revenue Mobilisation – Assesses the states’ ability to generate income.
- Fiscal Prudence – Measures financial discipline and sustainability.
- Debt Index – Examines the states’ debt burden.
- Debt Sustainability – Analyzes the ability to manage and service debt.
Each state is ranked based on its composite score, providing a comprehensive overview of fiscal performance and enabling targeted reforms.
Top Performing States
The 2025 rankings spotlight Odisha as the top-performing state, with an impressive score of 67.8, thanks to its robust revenue mobilization and prudent expenditure management. Chhattisgarh (55.2) and Goa (53.6) follow closely, showcasing their effective fiscal governance.
These states serve as benchmarks for others, demonstrating how disciplined financial strategies can lead to economic resilience and growth.
States Requiring Improvement
While states like Jharkhand have made progress in fiscal prudence and debt sustainability, others, such as Karnataka, face challenges in areas like expenditure quality and debt management. These disparities underscore the need for state-specific reforms to address unique fiscal challenges and bridge regional gaps.
Significance of the Fiscal Health Index
The FHI is more than a ranking system—it is a tool for policy evaluation and improvement, designed to:
- Promote fiscal consolidation at the state level.
- Ensure transparent resource management.
- Provide actionable insights to policymakers for aligning fiscal strategies with national development goals.
By encouraging states to adopt effective fiscal practices, the FHI fosters a culture of accountability and efficiency in governance.
Promoting Cooperative Federalism
The FHI emphasizes the importance of cooperative federalism in addressing fiscal disparities. Collaboration between the Centre and states is essential for achieving holistic economic development and ensuring balanced growth across regions. The report underscores that such partnerships are vital for driving sustainable progress.
Future Implications and Alignment with Viksit Bharat @2047
The Fiscal Health Index 2025 aligns with India’s vision of Viksit Bharat @2047, aiming for a fiscally stable and prosperous nation. By encouraging healthy competition among states, the FHI serves as a catalyst for improved governance and innovation in fiscal strategies.
The findings of the FHI will enable policymakers to make informed decisions, paving the way for long-term fiscal stability. As India marches toward its centennial year of independence, the FHI will play a critical role in guiding the nation toward economic resilience and sustainability.