<p>The NITI Aayog’s report about the fiscal performance of states comes with important insights at a time the states’ finances are in focus for various reasons. It is the first report of its kind. The performances of states vary across the country because the states have unique advantages and challenges in managing their economy.</p>.<p>The methods and styles of management have also differed. A comparative view of the finances would help them to find where they stand and incentivise those who have not done well to perform better. The report has formulated a Fiscal Health Index (FHI) which will serve as a framework to evaluate the states’ fiscal position across several parameters.</p>.<p>It is based on five sub-indices that relate to fiscal prudence, debt index, debt sustainability, revenue mobilisation, and quality of spending. The study covers 18 major states. Their performance on all these indicators is assessed and areas that need improvement are identified.</p>.<p>The top five performing states are Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat. Punjab, Andhra Pradesh, West Bengal, Kerala, and Haryana are at the bottom. The states have been placed in four categories depending on their performance. Karnataka has done well with a rank of 10, and with an overall score of 40.8 against Odisha’s 67.8, it is among the front-runners.</p>.NITI Aayog's Virmani revises FY'25 GDP growth projection for India amidst global uncertainty.<p> The states in this category show high developmental expenditure of up to 73 per cent, consistent growth in tax revenue, balanced fiscal management, and improved debt sustainability. The difference between the top and bottom states is big. While Odisha’s fiscal deficit was 2 per cent in 2022-23 it was 5 per cent for Punjab. Among the southern states, Telangana has also done well and is placed 8th but Tamil Nadu, Kerala, and Andhra Pradesh have challenges on most parameters.</p>.<p>The financial health of state governments is important because they account for about two-thirds of general government expenditure and one-third of overall revenues. Debt is the most serious problem for all of them. A recent Reserve Bank of India (RBI) study showed that the debt levels of most states are considerably above the fiscal norm.</p>.<p>The NITI Aayog report has said that the debt sustainability of some states has raised serious concerns. It has also said that “high persistent deficits and varying fiscal performances among states underscore the urgency for reform and targeted interventions.” In the matter of expenditure, a new concern has emerged over the impact of freebies and guarantees given by state governments on their finances. This needs to be studied. The NITI Aayog’s index gives a good picture of the relative positions of states, and the data should help in better policy formation and decision-making.</p>
<p>The NITI Aayog’s report about the fiscal performance of states comes with important insights at a time the states’ finances are in focus for various reasons. It is the first report of its kind. The performances of states vary across the country because the states have unique advantages and challenges in managing their economy.</p>.<p>The methods and styles of management have also differed. A comparative view of the finances would help them to find where they stand and incentivise those who have not done well to perform better. The report has formulated a Fiscal Health Index (FHI) which will serve as a framework to evaluate the states’ fiscal position across several parameters.</p>.<p>It is based on five sub-indices that relate to fiscal prudence, debt index, debt sustainability, revenue mobilisation, and quality of spending. The study covers 18 major states. Their performance on all these indicators is assessed and areas that need improvement are identified.</p>.<p>The top five performing states are Odisha, Chhattisgarh, Goa, Jharkhand, and Gujarat. Punjab, Andhra Pradesh, West Bengal, Kerala, and Haryana are at the bottom. The states have been placed in four categories depending on their performance. Karnataka has done well with a rank of 10, and with an overall score of 40.8 against Odisha’s 67.8, it is among the front-runners.</p>.NITI Aayog's Virmani revises FY'25 GDP growth projection for India amidst global uncertainty.<p> The states in this category show high developmental expenditure of up to 73 per cent, consistent growth in tax revenue, balanced fiscal management, and improved debt sustainability. The difference between the top and bottom states is big. While Odisha’s fiscal deficit was 2 per cent in 2022-23 it was 5 per cent for Punjab. Among the southern states, Telangana has also done well and is placed 8th but Tamil Nadu, Kerala, and Andhra Pradesh have challenges on most parameters.</p>.<p>The financial health of state governments is important because they account for about two-thirds of general government expenditure and one-third of overall revenues. Debt is the most serious problem for all of them. A recent Reserve Bank of India (RBI) study showed that the debt levels of most states are considerably above the fiscal norm.</p>.<p>The NITI Aayog report has said that the debt sustainability of some states has raised serious concerns. It has also said that “high persistent deficits and varying fiscal performances among states underscore the urgency for reform and targeted interventions.” In the matter of expenditure, a new concern has emerged over the impact of freebies and guarantees given by state governments on their finances. This needs to be studied. The NITI Aayog’s index gives a good picture of the relative positions of states, and the data should help in better policy formation and decision-making.</p>
