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Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat have topped NITI Aayog's Fiscal Health Index (FHI) for 2022-23, according to the rankings which were released on Friday.
The rankings, compiled by the government think tank, assessed states based on five key benchmarks: quality of expenditure, revenue mobilization, fiscal prudence, debt index, and debt sustainability.
The top five states, labelled "Achievers" by NITI Aayog, were followed by Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka, classified as 'Front runners', while four states of Tamil Nadu, Rajasthan, Bihar and Haryana were classified 'performers' and bottom four states, Kerala, West Bengal, Andhra Pradesh and Punjab were termed 'aspirational'.
A total of 18 states were evaluated for the report.
A first analysis of its kind, the FHI offers a systematic approach to assess the state’s fiscal health, identify areas for improvement, and promote best practices across states, said the report compiled from various government data sources by NITI Aayog's senior adviser Pravakar Sahoo and his team.
"The report objectively evaluates each state’s fiscal health through a composite index, facilitating comparisons and benchmarking against best practices," it added.
The report said as states navigate their unique fiscal challenges, the path forward hinges on a commitment to transparency, enhanced tax compliance, and targeted investments in social and economic infrastructure.
"By fostering a culture of fiscal prudence and accountability, states can stabilize their economies and elevate the quality of life for their citizens, ensuring a resilient and prosperous future. High persistent deficits and varying fiscal performances among states underscore the urgency for reform and targeted interventions," it said.
"The journey toward fiscal sustainability is complex, but with concerted efforts, it can lead to transformative outcomes that benefit all," it added.
Speaking to Mint, on the sidelines of the launch of the report, NITI Aayog's Sahoo said the Fiscal Health Index will be an annual affair, with the FHI for 2024-25 expected to be released next year.
It's not only aspirational categories, but some of the states, even those falling under the performers category, are seeing fluctuating but rising debt, which is not a very good sign, Sahoo said.
"This leaves very little space for productive capital expenditure," he added.
According to the report, Madhya Pradesh, Bihar, Chhattisgarh, and Odisha emerged as the top performers in quality of expenditure, followed by Karnataka, Jharkhand, Uttar Pradesh, and Goa, while Punjab and Kerala ranked at the bottom.
In revenue mobilization, Goa, Telangana, and Odisha led the rankings, followed by Maharashtra, Chhattisgarh, Kerala, Gujarat, Haryana, and Jharkhand, with Andhra Pradesh, West Bengal, and Bihar at the bottom.
For fiscal prudence, Jharkhand, Goa, Chhattisgarh, Odisha, and Gujarat claimed the top spots, while West Bengal, Rajasthan, Andhra Pradesh, Bihar, and Punjab were at the bottom.
Odisha, Chhattisgarh, Maharashtra, Gujarat, and Jharkhand topped the debt index rankings, whereas Haryana, Kerala, West Bengal, and Punjab occupied the lowest positions.
"The fiscal landscape across states reveals a picture where progress and challenges coexist," the report said.
"As states navigate their unique fiscal challenges, the path forward hinges on a commitment to transparency, enhanced tax compliance, and targeted investments in social and economic infrastructure," it added.
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