NITI Aayog Releases Fiscal Health Index 2026 to Measure States Financial Strength

NITI Aayog has released the second annual edition of the Fiscal Health Index 2026. This is the report designed to assess the fiscal performance and financial stability of Indian states. This report was launched in New Delhi by NITI Aayog Vice Chairman Suman Bery and CEO Nidhi Chhibber. The Fiscal Health Index 2026 provides a data driven framework that evaluates how effectively states manage their finances.

Purpose of the Fiscal Health Index

The Fiscal Health Index 2026 has been developed to offer a comprehensive assessment of the financial management practices of Indian states.

This index helps identify strengths and weaknesses in state level fiscal policies and also encourages the improvements in budget planning and expenditure management.

Recently public finances globally are under pressure and to maintaining strong fiscal governance at the state level is considered essential for ensuring macroeconomic stability and long term economic growth in India.

Expanded Coverage in Fiscal Health Index 2026

The Fiscal Health Index 2026 expands the scope of the previous edition.

In the first edition assessed 18 major states and the new edition also includes 10 North Eastern (NE) and Himalayan states.

To ensure fair comparisons these states are evaluated and ranked separately from the major states as their economic and geographical conditions differ significantly from larger states.

Five Pillars of the Fiscal Health Index

This Fiscal Health Index framework evaluates state finances through five key pillars. These pillars help create a balanced and data-driven assessment of fiscal performance.

The five pillars include,

1. Quality of Expenditure – Evaluates how efficiently states spend public funds.
2. Revenue Mobilisation – Measures the ability of states to generate their own revenue through taxes and other sources.
3. Fiscal Prudence – Assesses how responsibly states manage deficits and spending.
4. Debt Index – Tracks the level and structure of state government debt.
5. Debt Sustainability – Evaluates the ability of states to manage and repay their debt over time.

Fiscal Health Index 2026 Highlights for Major States

The Fiscal Health Index 2026 released by NITI Aayog and also evaluates the fiscal performance of Indian states.

Also classifies them into categories such as Achievers, Front Runners, Performers and Aspirational states.

The report provides insights into how effectively states manage revenues, expenditures, deficits and debt.

According to the Fiscal Health Index 2026 rankings Odisha emerged as the top performing state and also improving its score compared to the previous year.

Goa and Jharkhand also featured among the top performing Achiever states which reflecting strong fiscal discipline and efficient financial management.

Front-Runner and Performer States

The Front Runner category in the Fiscal Health Index 2026 includes states such as Gujarat, Maharashtra, Chhattisgarh, Telangana, Uttar Pradesh and Karnataka.

These states shows the stable fiscal performance but have slightly lower scores than the Achiever states.

The Performer category consists of Madhya Pradesh, Haryana, Bihar, Tamil Nadu and Rajasthan.

These states maintain relatively balanced fiscal structures but face challenges such as moderate deficits and limited fiscal flexibility.

Aspirational States Facing Fiscal Stress

The Aspirational category in the Fiscal Health Index 2026 includes West Bengal, Kerala, Andhra Pradesh and Punjab.

These states continue to face fiscal pressures due to higher deficits, rising debt levels and lower developmental spending.

Key fiscal challenges for Aspirational states include,

• Fiscal deficits frequently exceeding FRBM limits
• High debt levels between 35-45% of GSDP
• Large committed expenditures accounting for 50-60% of revenue receipts

Top NE and Himalayan States

Among the NE and Himalayan states the state of Arunachal Pradesh ranked first and followed by the Uttarakhand and Tripura.

These states demonstrated stronger fiscal performance across indicators such as expenditure quality, revenue mobilization and debt management.

Arunachal Pradesh and Meghalaya improved their rankings through higher capital expenditure and developmental spending.

Performer Category in NE and Himalayan States

The Performer group includes Assam, Meghalaya, Mizoram, Sikkim and Tripura.

These states show moderate fiscal performance with mixed results across different indicators.

While some states perform well in revenue mobilization or expenditure quality, others face challenges in debt sustainability or fiscal prudence.

Aspirational States

The Aspirational category among NE and Himalayan states includes the Himachal Pradesh, Manipur and Nagaland.

These states face fiscal pressures due to weaker revenue mobilization and higher expenditure commitments.

Importance of State Finances in India

State governments play a major role in India’s fiscal system because they are responsible for output of key public services such as healthcare, education and infrastructure development.

Their financial performance significantly influences the country’s overall economic stability.

Indian States currently account for nearly one third of India’s general government debt.

And also making their fiscal management crucial for maintaining sustainable public finances.

The Fiscal Health Index 2026 helps to monitor this financial trajectory.

Question

Q. Which organisation released the Fiscal Health Index 2026?

A. Reserve Bank of India
B. Ministry of Finance
C. NITI Aayog
D. Comptroller and Auditor General