Odisha Most Financially 'Healthy' State, Punjab Ranks Lowest: Where Does Your State Lie On FHI Rankings?
As per the 2022-23 FHI, based on CAG data, Odisha emerged as the top-performing state with a score of 67.8, followed by Chhattisgarh (55.2) and Goa (53.6).
India’s economic progress relies heavily on the fiscal health of its states, as they manage two-thirds of public spending and contribute one-third of total revenue. To assess and guide their financial strategies, NITI Aayog's Fiscal Health Index (FHI), released last week, evaluates states across five critical dimensions: expenditure quality, revenue mobilisation, fiscal prudence, debt index, and debt sustainability. The goal is to identify areas for reform and promote effective fiscal practices nationwide.
Before we take a look at the rankings, let's understand what FHI is all about.
What Does The FHI Measure?
The FHI aggregates five sub-indices:
- Quality of Expenditure: Measures the ratio of developmental spending and capital investment to total expenditure, indicating states' focus on long-term growth.
- Revenue Mobilisation: Reflects states’ ability to generate their own revenue relative to their economic output and expenses.
- Fiscal Prudence: Assesses the gap between revenue and expenditure, highlighting the extent of reliance on borrowing.
- Debt Index: Tracks debt-related metrics, such as interest payments and outstanding liabilities, to evaluate states’ debt burden.
- Debt Sustainability: Examines the balance between economic growth and debt servicing needs, with a positive difference indicating fiscal health.
Key Findings From Latest FHI Report
- Odisha's Lead: Odisha excelled in debt management and effective revenue mobilisation, making it the most fiscally stable state in 2022-23.
- Chhattisgarh and Goa: These states demonstrated balanced fiscal strategies, with Goa leading in revenue mobilisation efficiency.
- Areas of Concern: States like Punjab, Kerala, and Andhra Pradesh faced significant fiscal stress, attributed to high debt levels and low revenue generation.
Fiscal Health Rankings For 2022-23
The 2022-23 FHI, based on data from the Comptroller and Auditor General (CAG), analysed the fiscal performance of 18 major Indian states. Odisha emerged as the top-performing state with a score of 67.8, followed by Chhattisgarh (55.2) and Goa (53.6).
These states excelled in maintaining fiscal balance and optimising developmental expenditure.
On the other hand, Punjab ranked last with a score of 10.7, reflecting significant fiscal challenges.
| State | FHI Score | Rank | Key Strengths |
|---|---|---|---|
| Odisha | 67.8 | 1 | Debt sustainability, revenue mobilisation |
| Chhattisgarh | 55.2 | 2 | Balanced expenditure and fiscal prudence |
| Goa | 53.6 | 3 | High revenue mobilisation efficiency |
| Punjab | 10.7 | 18 | Struggles in debt sustainability and revenue |
Here are the full FHI rankings:
FHI's Implications For Policymakers
The report underscores the importance of prudent fiscal management at the state level. Balanced expenditure, enhanced revenue generation, and sustainable debt practices are key to ensuring long-term economic stability.
The FHI serves as a crucial tool for identifying weaknesses and encouraging best practices across states.
By focusing on improving fiscal health, Indian states can collectively contribute to stronger economic growth and national stability, NITI Aayog noted.
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