Fiscal Health Index (FHI), 2025

Why in news?

The Fiscal Health Index (FHI) was recently released by Niti aayog that provides a comprehensive assessment of the fiscal health of 18 major States.

Aim – To throw light on the fiscal status at the sub-national level and guide policy reforms for sustainable and resilient economic growth.
Fiscal Health Index 2025 – Is first of kind in India, a comprehensive assessment with insights into state-specific challenges and areas for improvement.
Five key sub-indices – The index is based on 5 key sub-indices that include Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability.
Launched by – Niti Aayog.
18 major States – The index assess the fiscal health of the only 18 major states.
Comptroller and Auditor General (CAG) – The report uses the data from CAG.
Odisha – With a cumulative score of 67.8, Odisha tops the ranking in fiscal health among 18 major States, followed by Chhattisgarh and Goa with scores of 55.2 and 53.6, respectively.
Odisha tops the Debt Index (99.0) and Debt Sustainability (64.0) rankings with better than average scores under Quality of Expenditure and Revenue Mobilization.
Strong fiscal health – The achiever States display strong fiscal health, excelling in revenue mobilization, expenditure management, and debt sustainability.
West Bengal and Punjab – States like West Bengal and Punjab witnessed growing debt burdens, increasing debt-to-GDP ratios and raising serious concern about debt sustainability.

Significance – FHI helps to promote more integrated approach to fiscal health and sustainable growth, with shared responsibility of both levels of government in achieving national prosperity.
FHI offers a roadmap for achieving fiscal consolidation, improving transparency, and fostering effective resource management.
FHI is not merely a ranking but a tool designed to assess and thereby improve the fiscal health of States.
It provides a framework to evaluate the financial well-being of state economies through key fiscal indicators.