NITI Aayog Fiscal Health Index 2026: Check Highlights, Objectives and Top Performing States

The Fiscal Health Index (FHI) includes 28 states categorizing them into Major States and North-Eastern (NE) and Himalayan States, and serves as a diagnostic tool for policymakers to identify structural fiscal challenges. The Index promotes evidence-based reforms of States and UTs and ensures long-term macroeconomic stability as India progresses toward its goal of  Viksit Bharat @2047.

The NITI Aayog’s Fiscal Health Index 2026 highlights how  Indian states manage their revenues, expenditures and debt by utilizing verified data from the Comptroller and Auditor General (CAG). The Report also offers a standardized metric to foster competitive and cooperative federalism within the country.

Objectives of the Fiscal Health Index 2026:

• To provide a systematic and comparable evaluation of the fiscal soundness of Indian state governments by setting the benchmark.

• To assist states to identify specific areas for fiscal reform like revenue mobilization and expenditure investment within the state.

• To encourage data-driven decision-making in public finance management to ensure evidence -based policy implementation.

• To ensure states maintain a sustainable debt trajectory and adhere to the Fiscal Responsibility and Budget Management (FRBM) Act 2003.

Highlights of  the NITI Aayog’s Fiscal Health Index 2026

The NITI Aayog’s Fiscal Health Index 2026 released by evaluating the state governments across five critical dimensions (Five Pillars of Assessment) such as

1. Quality Expenditure: State government share of developmental spending and capital outlay compared to total expenditure.

2. Revenue Mobilisation: Assessment of state government capacity to generate its own tax and non-tax revenues and reducing dependency on central government.

3. Fiscal Prudence: management of fiscal and revenue deficits relative to Gross State Domestic Product (GSDP).

4. Debt Index: track and measurement of outstanding liabilities and interest payments.

5. Debt Sustainability: Evaluating long-term sustainability of the state funds and its debt based on economic growth rates.

Performance of the States: 

Performance Rankings classified into the Major States and North-Eastern (NE) & Himalayan States further categorized in Achievers, Front Runners, Performers and Aspirational.

Major States and North-Eastern (NE):

• Top Performer or Achievers: Odisha followed by Goa and Jharkhand, states are characterized by high own-tax shares above 60%) and low fiscal deficits below 3%).
• Front Runners: Includes Gujarat, Maharashtra, Chhattisgarh, Telangana, Uttar Pradesh, and Karnataka.
• Aspirational or Bottom Rankers: Punjab, West Bengal, and Kerala recorded the lowest scores due to high non-developmental spending, elevated debt levels (35–45% of GSDP), and persistent fiscal stress.

North-Eastern (NE) & Himalayan States:

States are ranked separately due to their difficult terrain and limited economic opportunities, includes:

• Top Performers or Achievers: Arunachal Pradesh (Rank 1) and Uttarakhand (Rank 2) emerged as Achievers.
• Bottom Rankers: Himachal Pradesh and Manipur under committed expenditure).

Source: NITI Aayog

Critical Policy Recommendations suggested by NITI Aayog Fiscal Health Index:

• Enhancing own-tax capacity to ensure fiscal autonomy such as broadening the Goods and services Tax (GST).

• Rationalisation of subsidies given by the governments by curbing committed expenditures to restore fiscal flexibility.

• Improving the quality of spending to drive long-term asset creation by promoting sustainable Capital Expenditure(CapEx).

• Increasing transparency in state liabilities and investment by monitoring Off-Budget expenses or borrowings.

Fiscal Health Index 2026 of NITI Aayog shows  Authority and Trustworthiness which relies on objective experience in public finance and utilizes CAG-verified data to ensure Expertise for researchers, investors, and policymakers. The report serves as a guide to the fiscal management of the Indian states in 2026.

Also Read: India Emerges as the World’s 3rd Largest Metro Network