
Why in News?
NITI Aayog has released the second edition of the Fiscal Health Index (FHI) 2026, providing a comprehensive assessment of the fiscal performance of Indian States during FY 2023–24. The report expands its coverage to include 10 North-Eastern and Himalayan States, in addition to the 18 major States assessed in the inaugural edition.
Key Highlights
- Expanded coverage: Evaluates 28 States (18 major States + 10 North-Eastern and Himalayan States).
- Purpose: Measures the fiscal health of States using a transparent and data-driven framework.
- Fiscal significance: States account for nearly two-thirds of public expenditure and about one-third of the general government debt.
- Key finding: Most States recorded moderate fiscal performance, with significant variations across regions.
- Recommendations: Improve own tax revenue, rationalise committed expenditure, strengthen capital expenditure, enhance public financial management, and ensure debt sustainability.
What is the Fiscal Health Index (FHI)?
- The Fiscal Health Index (FHI) is an annual report released by NITI Aayog to evaluate the fiscal performance of States using objective indicators. It promotes fiscal discipline, financial sustainability, and evidence-based policymaking while encouraging States to improve public financial management.
Key Parameters of the Fiscal Health Index
- Quality of Expenditure
- Revenue Mobilisation
- Fiscal Prudence
- Debt Management
Significance of the Fiscal Health Index
- Encourages competitive and cooperative federalism.
- Helps identify strengths and weaknesses in State finances.
- Supports informed policy decisions and fiscal reforms.
- Promotes sustainable public finances and efficient resource allocation.
- Enhances transparency and accountability in fiscal governance.
Challenges Highlighted by the Report
- Low own tax revenue in several States.
- High committed expenditure on salaries, pensions, and interest payments.
- Rising debt burden in some States.
- Limited fiscal space for developmental expenditure.
- Regional disparities in fiscal performance.







