Knowledge Nugget | Fiscal Health Index 2026: Key highlights for UPSC and other competitive exams

Key Takeaways 

1. The Indian states play a critical role in resource allocation to essential sectors such as agriculture, poverty alleviation, human development, urbanization, and infrastructure. Effective fiscal management in these areas can stimulate growth, enhance social welfare, and promote regional economic convergence.

2. In this context, the Fiscal Health Index serves as a comprehensive framework for assessing and comparing the fiscal performance of Indian states. 

3. The first edition of the Index focused on 18 major states. The 2nd edition evaluates not only the 18 General Category States but also the 10 North-Eastern (NE) and Himalayan States, making the Index more inclusive and representative of India’s fiscal diversity for 2023-24. The inclusion brings focus to fiscal patterns shaped by geographic remoteness, demographic characteristics, and higher service delivery costs.

4. The FHI continues to use the five fiscal pillars to measure the fiscal health of states. The five pillars are: quality of expenditure, revenue mobilisation, fiscal prudence, debt index, and debt sustainability.

(Source: FHI Index 2026)

5. Odisha remains the top performer, improving its score over the previous year, with Goa and Jharkhand also featuring among the top Achiever states. Gujarat and Maharashtra continue in the top five.

6. Haryana records a notable year-on-year improvement of three ranks. Bihar, Karnataka and Telangana show a mild recovery, whereas Punjab, West Bengal and Kerala remain at the bottom of the rankings.

7. Overall, higher-ranked states display stronger fiscal discipline and resource mobilisation efforts, while lower ranked states exhibit higher non-developmental expenditure and less sustainable fiscal patterns. 

8. The Achiever group (Odisha, Goa and Jharkhand) is characterised by high own- tax shares (above 60%), relatively large capital outlay (around 4-5% of GSDP), low fiscal deficits (below 3% of GSDP), moderate debt levels (under 25% of GSDP) and contained interest burdens.

Final Ranking of States for 2023-24 (Source: FHI 2026)

9. Front-Runner states are Gujarat, Maharashtra, Chhattisgarh, Telangana, Uttar Pradesh and Karnataka. Whereas Performer states are Madhya Pradesh, Haryana, Bihar, Tamil Nadu and Rajasthan.

10. Aspirational states in the index are West Bengal, Kerala, Andhra Pradesh and Punjab. These states face persistent revenue and fiscal deficits often breaching FRBM norms, elevated debt levels of roughly 35-45% of GSDP, committed expenditure accounting for about 50-60% of revenue receipts, large interest payments exceeding 15-20%, and relatively low developmental spending.

Ranking of  North Eastern (NE) /Himalayan States

1. The NE /Himalayan States have been ranked separately from the major states and classified into three groups i.e.,

(i) Achievers: Arunachal Pradesh, Uttarakhand

(ii) Performers: Assam, Meghalaya, Mizoram, Sikkim, Tripura

(iii) Aspirational: Himachal Pradesh, Manipur, Nagaland

2. Arunachal Pradesh ranks highest, followed by Uttarakhand and Tripura, reflecting stronger expenditure quality, revenue capacity and debt management, whereas Himachal Pradesh and Manipur remain at the bottom due to weak revenues and persistent fiscal stress.

BEYOND THE NUGGET: Sustainable Development Goals (SDG) India Index

1. The NITI Aayog’s SDG India Index for SDGs evaluates progress of states and Union Territories (UTs) on various parameters including health, education, gender, economic growth, institutions, climate change and environment. First launched in December 2018, the index has become the primary tool for monitoring progress on the SDGs in India.

2. The SDG India Index scores range between 0–100, higher the score of a State/UT, the greater the distance to target achieved. States and UTs are classified in four categories based on their SDG India Index score — aspirant: 0–49; performer: 50–64; front-runner: 65–99, achiever: 100. According to the NITI Aayog SDG index, India’s score for 2023-24 was 71.

Post Read Question

With reference to the Fiscal Health Index (FHI), consider the following statements:

1. It is released by the Reserve Bank of India.

2. The index assesses the fiscal performance of Indian states.

3. The FHI 2026 expanded coverage to include North-Eastern and Himalayan states.

Which of the statements given above is/are correct?

(a) 1 and 2 only

(b) 2 and 3 only

(c) 1 only

(d) 1, 2 and 3

(Source: niti.gov.)

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