- Pressures from committed expenditure, debt servicing, and uneven revenue capacity persist across states.
- Odisha again topped Niti Aayog's latest Fiscal Health Index.
- As per the index, Punjab, Andhra Pradesh, West Bengal and Kerala are at the bottom of the rankings.
Pressures from committed expenditure, debt servicing, and uneven revenue capacity persist across several states, wrote senior Niti Aayog member Arvind Virmani in his foreward to the commission's latest report on states' fiscal health. The report, which compares the finances of 18 major states, presents a contrast between the states that are managing finances prudently and those that are burdening their economy under massive debts.
Like the last time, Odisha again topped Niti Aayog's latest Fiscal Health Index. The eastern state secured an overall score of 73.1. It was closely followed by Goa and Jharkhand. Gujarat and Maharashtra remain among the stronger performers, while Chhattisgarh, Telangana, Uttar Pradesh, Karnataka and Madhya Pradesh also figure in the top ten.
However, the broader picture in the report is less comforting as several large states continue to struggle with rising debt and persistent fiscal deficits. As per the index, Punjab, Andhra Pradesh, West Bengal and Kerala are at the bottom of the rankings, and have been put in the "aspirational" category. Higher borrowing levels, continued fiscal gaps, and relatively modest revenue growth have severely affected the fiscal health of these states.
"High expenditure rigidity, particularly in Punjab and Andhra Pradesh, and weak debt sustainability in these states highlight the need for targeted fiscal reforms, improved debt management, and better-quality spending to restore fiscal balance," said the report.
The report evaluates state finances using five broad indicators -- revenue mobilisation, expenditure quality, fiscal prudence, debt management and debt sustainability.
What separates the stronger states from the rest is not just how much revenue they collect, but how they spend it. States that rank higher tend to show better revenue mobilisation and tighter control over expenditure.
In several of the lower-ranked states, a large share of government spending goes towards committed liabilities such as salaries, pensions and interest payments. That leaves lesser room for capital expenditure and development spending.
North-East States Ranked Separately
This time, the Niti Aayog ranked the North-Eastern and Himalayan States separately. The best scorers (achievers) were -- Arunachal Pradesh and Uttarakhand). The second-best (performers) were -- Assam, Meghalaya, Mizoram, Sikkim, and Tripura. Lastly, those put in the red (aspirational) category were -- Himachal Pradesh, Manipur, and Nagaland.
As state governments account for a significant portion of public spending, state finances have become increasingly important in India's fiscal landscape. Niti Aayog Vice Chairman Suman Bery, while releasing the report on March 11, said maintaining sound fiscal buffers at the state level is important, especially when economies face external or domestic shocks.
See full list:-
State | Overall Score
Odisha | 73.1
Goa | 54.7
Jharkhand | 50.5
Gujarat | 49.9
Maharashtra | 45.0
Chhattisgarh | 44.3
Telangana | 44.3
Uttar Pradesh | 41.9
Karnataka | 41.7
Madhya Pradesh | 37.8
Haryana | 34.5
Bihar | 30.9
Tamil Nadu | 29.8
Rajasthan | 27.6
Kerala | 24.8
West Bengal | 23.8
Andhra Pradesh | 23.1
Punjab | 12.4
