 "Odisha fiscally healthiest; Punjab, AP, WB laggards: NITI Aayog report")
Odisha and Chhattisgarh are India’s fiscally healthiest states, with states such as Andhra Pradesh, Punjab, West Bengal, and Kerala lagging (classified as “aspirational states”), the NITI Aayog, central-government think tank, said on Friday.
The Aayog, using data from the Comptroller and Auditor General (CAG), released its first fiscal-health index (FHI) report for 18 states (excluding special-category states), which contribute 85 per cent of the cumulative gross domestic product of all states.
The index focuses on five sub-indices and covers the period from 2022-23 — the quality of expenditure, revenue mobilisation, fiscal prudence, debt index, and debt sustainability.
“Odisha excels in fiscal health with the highest overall index score of 67.8, the report said. It tops the Debt Index (99.0) and Debt Sustainability (64.0) rankings with better than average scores under Quality of Expenditure and Revenue Mobilization. The state has maintained low Fiscal Deficits, a good debt profile, and an above average Capital Outlay/GSDP ratio,” the NITI Aayog said.
The quality of expenditure is calculated by finding the ratio of developmental expenditure to a state’s expenditure, and the ratio of capital outlay to its gross state domestic product.
Different needs and priorities of states reflect in their scores in various sub-indices, according to the think tank.
“Uttar Pradesh and Bihar have a good score under Quality of Expenditure, but they rank lower with regard to Revenue Mobilization. Karnataka performs well across most indices but it ranks amongst the three aspirational states in Debt Sustainability. Odisha and Chhattisgarh have performed well under Revenue Mobilization, with their Own Non-Tax Revenue growing significantly due to high revenue collection from mining. However, regarding Debt Sustainability, Chhattisgarh ranks lower compared to some other states,” its report said.
The think tank cautioned that states like West Bengal and Punjab witnessed growing debt burdens, increasing debt-to-GDP ratios and raising serious concern about debt sustainability.
Interest payment in West Bengal accounts for 20.47 per cent of revenue receipts in 2022-23, constraining the ability of the state to allocate funds for development, the Aayog said.
It suggested both states exercise fiscal discipline and increase avenues for revenue mobilisation.
In Kerala, the think tank suggested: “The state may focus on enhancing revenue mobilization through effective tax and Non-Tax strategies, optimizing resource efficiency, increasing Capital Expenditure in the Social Services Sector are increased, and rationalizing expenditures to improve its fiscal health.”
The chairman of the 16th Finance Commission, Arvind Panagariya, who released the report in New Delhi, said the commission had visited 16 of the 28 states so far. The recommendations of the commission will be in effect from April 2026.
Panagariya, who was NITI Aayog’s first vice-chairman, said the quality of expenditure in Gujarat was high. The state, on its index, has been given 40 out of 100 on expenditure quality.