India’s policymakers and thinktanks should focus on studying the States a lot more, Arvind Panagariya, Chairman of 16th Finance Commission suggested on Friday
He was speaking at a launch event of first ever ‘Fiscal Health Index 2025’ report prepared by NITI Aayog.
“Even though one, including the media, tends to conveniently focus only on the Centre, we need to pay lot more attention and get involved in the work of States. This is where ultimately the action at the ground level is,“ Panagariya said after releasing the Inaugural issue of FHI report in the capital.
He noted that Fiscal Health Index initiative would be an annual exercise.
The report provides a comprehensive assessment of the fiscal health of 18 major States, based on five key sub-indices—quality of expenditure, revenue mobilisation, fiscal prudence, debt index, and debt sustainability, along with insights into state-specific challenges and areas for improvement.
The FHI aims to throw light on the fiscal status at the sub-national level and guide policy reforms for sustainable and resilient economic growth.
State ranks
With a cumulative score of 67.8, Odisha tops the ranking in fiscal health among 18 major States, followed by Chhattisgarh and Goa with scores of 55.2 and 53.6, respectively. The achiever States display strong fiscal health, excelling in revenue mobilisation, expenditure management, and debt sustainability. Improvements are seen in states like Jharkhand, which has strengthened fiscal prudence and debt sustainability, while Karnataka faces a decline due to weaker performance in expenditure quality and debt management.
These interstate disparities highlight the need for targeted reforms to address specific fiscal challenges and ensure sustainable growth.
The FHI is designed to assist policymakers by offering insights into states’ fiscal health and helping identify areas requiring intervention and strategic planning.
Stable fiscal path
Panagariya underscored the need for the States to follow a stable fiscal path for balanced regional development, long-term fiscal sustainability, and prudent governance.
He mentioned that the FHI offers a comprehensive and systematic approach to measuring state-level fiscal performance and provides valuable insights into broader fiscal trends, allowing for a better understanding of fiscal health across the country.
He emphasised that the FHI report helps to promote a more integrated approach to fiscal health and sustainable growth, reinforcing the shared responsibility of both levels of government in achieving national prosperity.
Speaking on the occasion, Suman Bery, Vice Chairman, NITI Aayog emphasised that the FHI offers a roadmap for achieving fiscal consolidation, improving transparency, and fostering effective resource management. He further stated that FHI is not merely a ranking but a tool designed to assess and thereby improve the fiscal health of States. It provides a framework to evaluate the financial well-being of state economies through key fiscal indicators.
NITI Aayog CEO BVR Subrahmanyam highlighted that the FHI report will be instrumental in helping policymakers make informed decisions. He noted that the report provides an objective picture of the fiscal landscape across states and also offers actionable insights for strengthening fiscal resilience and ensuring sustainable economic development of the States. By focusing on major fiscal indicators, the FHI encourages states to align their fiscal strategies with national objectives, ensuring their contributions to the goal of a fiscally stable and prosperous India and, most importantly, promoting healthy competition among states.
He stressed that the FHI’s findings are aligned with India’s broader vision of achieving “Viksit Bharat @2047,” where fiscal discipline at the state level plays a pivotal role in the nation’s economic transformation.
NEW PORTAL ON STATE FINANCES
Subrahmanyam said in next 15 days Niti Aayog will launch a joint portal with NCAER where one would get lot of real time data on State finances. NCAER has been supporting government in the analysis of State finances and this portal would serve as a “one-stop- shop” for all data of State Finances, he said.
This is part of the larger work towards pushing State Finances up to the forefront and then NITI stepping in to helping States to move to a fiscal position, he added.