New Delhi, March 11 (NationPress) On Wednesday, the NITI Aayog unveiled the second annual version of the "Fiscal Health Index", aimed at delivering a thorough and comparative evaluation of the fiscal performance of Indian states.

This Index serves as a data-driven framework designed to assess fiscal soundness, direct reforms, and enhance evidence-based fiscal policy-making across states.

In light of the growing pressures on global public finances, the sustainability of sub-national finances has gained heightened significance. Effective fiscal management at all government levels is now crucial for maintaining macroeconomic stability and facilitating long-term growth, as stated officially.

State governments in India are pivotal to the nation's fiscal structure. Presently, states contribute nearly one-third of India's overall government debt, rendering their fiscal trajectory vital for national fiscal sustainability. Considering the extent of state expenditure responsibilities and their vital role in providing essential public services, a systematic evaluation of state finances is necessary to uphold fiscal discipline, optimize resource allocation, and ensure long-term macroeconomic stability. The Fiscal Health Index aims to achieve this by allowing states to benchmark their performance and pinpoint areas needing improvement, as per the statement.

The latest edition of the Fiscal Health Index broadens the framework's scope. Unlike the first edition, which evaluated 18 major states, this edition incorporates the 10 northeastern and Himalayan states, enhancing the Index's inclusiveness and representation of India's fiscal diversity. To accommodate regional structural differences, the northeastern and Himalayan states are assessed and ranked separately from the major states.

The analysis indicates significant disparities in fiscal outcomes among states. In 2023-24, most of the 18 major states showed moderate Fiscal Health Index (FHI) scores compared to the previous year, highlighting evolving fiscal pressures. The northeastern and Himalayan states also display considerable variation in fiscal performance.

The report underscores various policy priorities essential for bolstering fiscal health across states. Key recommendations include boosting revenue mobilization and enhancing the states' own-tax capacity; streamlining committed expenditures to restore fiscal flexibility; refining the composition and quality of capital expenditure; and implementing medium-term fiscal planning frameworks to manage deficits and debt trajectories more efficiently. Additionally, the report stresses the importance of strengthening public financial management systems, improving transparency through verified fiscal data, and closely monitoring off-budget borrowings.

Upon releasing the "Fiscal Health Index 2026", NITI Aayog Vice-Chairman Suman Bery stated that enhancing fiscal governance at the state level is crucial for maintaining macroeconomic stability and ensuring India's growth path. He pointed out that systematic benchmarking tools like the Fiscal Health Index will assist states in recognizing structural fiscal challenges and adopting targeted policy reforms.

NITI Aayog CEO Nidhi Chhibber praised the team for creating a comprehensive and analytically sound framework for assessing state finances. She emphasized that improving fiscal resilience among states is key to sustaining long-term development, diminishing regional disparities, and fulfilling India’s developmental goals.

The Fiscal Health Index 2026 serves as a valuable resource for policymakers, researchers, and stakeholders by providing a transparent and data-driven evaluation of state finances. With its analytical insights and benchmarking framework, the Index aspires to support informed fiscal decision-making and reinforce the foundations of sustainable public finance across states.