New Delhi: The NITI Aayog has released the second annual edition of the “Fiscal Health Index (FHI) 2026”, a comprehensive framework designed to evaluate the fiscal performance and financial sustainability of Indian states.
The report was unveiled in New Delhi by **Suman Bery, Vice-Chairman of NITI Aayog, and Nidhi Chhibber, Chief Executive Officer (CEO) of the policy think tank, in the presence of senior government officials.
The Fiscal Health Index aims to provide a data-driven and comparable assessment of state finances, helping policymakers identify strengths and weaknesses in fiscal management and encouraging evidence-based reforms.
Framework to Evaluate Fiscal Soundness of States
The Fiscal Health Index has been designed as a systematic tool to evaluate the fiscal soundness, sustainability and efficiency of public finance management at the state level.
At a time when global public finances are facing increasing pressure, maintaining fiscal discipline at all levels of government has become critical for macroeconomic stability and long-term economic growth.
In India, state governments play a central role in the country’s fiscal architecture, accounting for nearly one-third of the general government debt. Given their significant spending responsibilities and role in delivering public services such as healthcare, education and infrastructure, monitoring their fiscal performance is essential.
The Index therefore enables benchmarking across states, identifies areas requiring policy intervention, and promotes better resource allocation and fiscal discipline.
Expanded Coverage in Second Edition
The second edition of the Fiscal Health Index expands the scope of the framework to make it more inclusive.
While the first edition assessed 18 major states, the 2026 edition now includes 10 Northeastern and Himalayan states, reflecting India’s fiscal diversity and regional differences.
To account for structural variations in revenue capacity, geographic constraints and economic conditions, the Northeastern and Himalayan states have been evaluated and ranked separately from the major states.
This approach ensures a more balanced and meaningful comparison of fiscal performance across different regions.
Variation in Fiscal Performance Across States
The report highlights significant variation in fiscal outcomes among states.
Among the 18 major states, most recorded moderated Fiscal Health Index scores in the financial year 2023–24 compared to the previous year, indicating evolving fiscal pressures and changing expenditure patterns.
Similarly, the Northeastern and Himalayan states also exhibited wide variations in fiscal performance, reflecting differences in revenue generation capacity, expenditure obligations and fiscal management strategies.
Key Policy Priorities Identified in the Report
The report outlines several important policy priorities aimed at strengthening fiscal health across states.
These include:
• Enhancing revenue mobilisation and improving states’ own tax capacity
• Rationalising committed expenditures to restore fiscal flexibility
• Improving the composition and quality of capital expenditure
• Adopting medium-term fiscal planning frameworks to manage deficits and debt more effectively
The report also emphasises strengthening public financial management systems, improving transparency through verified fiscal data, and closely monitoring off-budget borrowings.
Need for Strong Fiscal Governance
Speaking at the release event, Suman Bery emphasised that strengthening fiscal governance at the state level is essential for maintaining macroeconomic stability and sustaining India’s economic growth.
He noted that tools such as the Fiscal Health Index help states identify structural fiscal challenges and design targeted policy reforms.
Fiscal Resilience Key for Long-Term Development
NITI Aayog CEO Nidhi Chhibber highlighted the importance of building fiscal resilience across states.
She commended the team behind the report for developing a comprehensive and analytically robust framework to evaluate state finances.
According to her, improving fiscal health across states will play a crucial role in supporting long-term development, reducing regional disparities, and advancing India’s development goals.
Resource for Policymakers and Researchers
The Fiscal Health Index 2026 is expected to serve as an important resource for policymakers, researchers, economists and government stakeholders.
By offering transparent, data-driven insights and enabling benchmarking among states, the Index aims to support informed fiscal decision-making and strengthen sustainable public finance management across India.
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