Odisha Tops NITI Aayog’s First Fiscal Health Index

  • January 25, 2025
  • Posted by: OptimizeIAS Team
  • Category: DPN Topics
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Odisha Tops NITI Aayog’s First Fiscal Health Index

Sub : Eco

Sec : Fiscal Policy

Why in News

  • The NITI Aayog has released its inaugural Fiscal Health Index (FHI) Report 2025, which assesses the fiscal health of Indian states for the year 2022-23. The report is significant for understanding states’ fiscal stability, debt sustainability, and developmental expenditure, making it a critical reference for policymakers.

Top-Performing States:

  • Odisha leads with a cumulative score of 67.8, followed by Chhattisgarh (55.2) and Goa (53.6).
  • These states demonstrated:
    • Higher capital outlay: Up to 4% of Gross State Domestic Product (GSDP).
    • Effective revenue mobilisation: Particularly non-tax revenue.
    • Revenue surplus: Low fiscal deficits.
    • Low interest payments: Constituting up to 7% of revenue receipts.
  • Odisha topped both the debt index (99.0) and the debt sustainability index (64.0).

Front-Runners Category:

  • States like Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka were classified as front-runners due to:
    • High developmental expenditure: Up to 73% of total expenditure.
    • Balanced fiscal management.
    • Improved debt sustainability with a debt-to-GSDP ratio of 24%.

Aspirational States:

  • Kerala, Punjab, Andhra Pradesh, and West Bengal were categorized as aspirational due to fiscal challenges.
  • Issues with Low-Performing States
  • Kerala and Punjab: Low-quality expenditure and poor debt sustainability.
  • West Bengal: Struggles with revenue mobilisation and debt index challenges.
  • Andhra Pradesh: High fiscal deficit levels.
  • Haryana: Weak debt profile.

About Fiscal Health Index (FHI):

  • The FHI provides a comprehensive assessment of the fiscal health of 18 major Indian states, aiming to guide policy reforms for sustainable and resilient economic growth.
  • The FHI evaluates states based on a composite fiscal index comprising five major sub-indices:
    • Quality of Expenditure: Assesses the efficiency and effectiveness of state spending, emphasizing capital expenditure and developmental priorities.
    • Revenue Mobilisation: Evaluates the state’s ability to generate revenue through tax and non-tax sources, reflecting fiscal capacity and effort.
    • Fiscal Prudence: Measures adherence to fiscal discipline, focusing on maintaining fiscal deficits within prescribed limits and ensuring responsible financial management.
    • Debt Index: Analyses the composition and magnitude of state debt, considering factors like debt-to-GSDP ratio and interest payment obligations.
    • Debt Sustainability: Assesses the state’s capacity to manage and repay its debt without compromising fiscal stability, ensuring long-term financial health.
  • Data is sourced from credible government records, including reports from the Comptroller and Auditor General (CAG).
economy Odisha Tops NITI Aayog's First Fiscal Health Index