Context:

Recently, the Chairman of the 16^th Finance Commission, Dr. Arvind Panagariya, launched the inaugural issue of NITI Aayog’s report titled Fiscal Health Index (FHI) 2025.

About the Fiscal Health Index (FHI)

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.

It covers eighteen major states that contribute significantly to India’s GDP, demographics, public expenditure, revenues, and fiscal stability.

States are responsible for approximately two-thirds of public spending and one-third of total revenue, making their performance crucial for India’s overall economic stability.

It aligned with India’s broader vision of achieving “Viksit Bharat @2047.” 

The composite FHI is developed using data from the Comptroller and Auditor General (CAG) and focuses on five sub-indices:

• Quality of Expenditure
• Revenue Mobilization
• Fiscal Prudence
• Debt Index
• Debt Sustainability

Key Findings of Index

Top-Performing States for FY 2022-23:

• Odisha: Leading in fiscal health with a score of 67.8. Excels in Debt Index (99.0) and Debt Sustainability (64.0), strong in Quality of Expenditure and Revenue Mobilisation. Low fiscal deficits and healthy debt profile.
• Following Odisha, Chhattisgarh has a score of 55.2, with a strong performance in the Debt Index, while Goa has a score of 53.6, notable for its success in Revenue Mobilisation.

‘Front-Runner’ States:

• Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka are categorized as ‘front-runners’ based on their performance.

Jharkhand: Improved fiscal health, ranking 4th in FY 2022-23 (up from 10th in 2015-19 to 2021-22), driven by better revenue mobilization, fiscal prudence, and improved debt sustainability.

Worst-performing states (Aspirational):

• Punjab & Kerala: Struggle with low-quality expenditure and debt sustainability.
• West Bengal: Issues with revenue mobilization and debt indices.
• Andhra Pradesh: Significant fiscal deficit.
• Haryana: Weak debt profile.

About the NITI Aayog (National Institution for Transforming India) 

• On January 1, 2015, the NITI Aayog was, established as the successor to the Planning Commission, created by an executive resolution from the Government of India (Union Cabinet).
• it is a non-constitutional (not created by the Constitution) and non-statutory (not created by an Act of Parliament) body.

Role and Function of NITI Aayog: 

• NITI Aayog serves as the premier policy think tank of the Government of India, providing both directional and policy inputs.
• NITI Aayog is responsible for designing strategic and long-term policies and programs for the Government of India.
• It also provides technical advice to both the Centre and States.
• The one-way flow of policy from the Centre to States, characteristic of the Planning Commission era, is being replaced with a genuine partnership between the Centre and States.
• NITI Aayog encourages a collaborative approach, as opposed to the command-and-control method of the past.
• In line with the spirit of federalism, NITI Aayog operates on a bottom-up approach, shaping its policy thinking by considering inputs from various stakeholders, rather than the traditional top-down model.

The NITI Aayog Composition:

1. Chairperson: The Prime Minister of India.

2. Governing Council: Includes Chief Ministers of all States, Chief Ministers of Union Territories with legislatures, and Lt. Governors of other Union Territories.

3. Regional Councils: Formed to address issues affecting multiple states/regions, convened by the Prime Minister, chaired by the Chairperson or their nominee.

4. Special Invitees: Experts and specialists nominated by the Prime Minister.

5. Full-time Organisational Framework:

• Vice-Chairperson: Appointed by the Prime Minister, with Cabinet Minister rank.
• Full-time Members: Hold the rank of Minister of State.
• Part-time members, ex-officio members, chief executive officer and secretariat.