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).