Published: 21 March 2026NITI AayogEconomy
NITI Aayog Fiscal Health Index 2026: Odisha Tops Major States, Rajasthan Ranked 14th
NITI Aayog released the second edition of its Fiscal Health Index (FHI) 2026 in March 2026, covering FY 2023-24 data sourced from the Comptroller and Auditor General (CAG) of India. The index evaluates the fiscal health of Indian states across five key pillars: (1) Fiscal Prudence, (2) Debt Management, (3) Revenue Mobilisation, (4) Quality of Expenditure, and (5) GSDP Growth Alignment.
Among major states (population above 10 million), Odisha emerged as the top performer for the second consecutive year, owing to its low debt-to-GSDP ratio, strong own-tax revenue growth, and disciplined capital expenditure. Among Northeastern and Himalayan states, Arunachal Pradesh secured the top position, reflecting its improved revenue collection efficiency and controlled borrowings.
Rajasthan's position in the Fiscal Health Index merits close attention. Rajasthan has historically faced fiscal stress due to high subsidy burden, power sector liabilities (DISCOMS), and large pension obligations. The state's debt-to-GSDP ratio and revenue deficit have been areas of concern flagged in prior CAG and Finance Commission reports. Under the Fiscal Responsibility and Budget Management (FRBM) Act, states are required to keep fiscal deficit within 3% of GSDP; Rajasthan has frequently sought additional borrowing limits from the Centre.
The FHI 2026 was the first edition to incorporate expenditure quality metrics — measuring the ratio of capital expenditure to total expenditure — rewarding states that invest in physical infrastructure and human capital rather than just current expenditure.
The index is significant for RPSC/RAS aspirants as it covers State Finance, Fiscal Federalism, CAG's role, and the FRBM framework — all high-weightage areas under Paper II (Indian Administration) and Paper III (Rajasthan Economy).
0Mains angle
Q: Discuss the NITI Aayog Fiscal Health Index 2026 framework and its implications for Rajasthan's fiscal management.
Answer (50 words):
NITI Aayog's second Fiscal Health Index (March 2026) uses FY 2023-24 CAG data across five pillars: fiscal prudence, debt management, revenue mobilisation, expenditure quality, GSDP growth. Odisha topped major states for a second year; Arunachal Pradesh led Northeast-Himalayan states. Rajasthan faces stress from DISCOM liabilities, subsidies, and pension burden.
6-axis classification
CoverageRajasthanSubjectEconomicExamBasic Computer Instructor · CET Graduation · CET Senior Secondary · EO/RO · LDC · Mahila Supervisor · Patwar · PTI · RAS · REET · RPSC SI · School Lecturer · Senior Computer Instructor · Senior Teacher · UPSC · Vanpal · BothSourceNITI Aayog
Frequently asked questions
What are the five pillars of the NITI Aayog Fiscal Health Index 2026?
The **Fiscal Health Index (FHI) 2026** evaluates states on five pillars:
1. **Fiscal Prudence** — fiscal deficit management
2. **Debt Management** — debt-to-GSDP ratio
3. **Revenue Mobilisation** — own-tax and non-tax revenue growth
4. **Quality of Expenditure** — capital expenditure as a share of total expenditure
5. **GSDP Growth Alignment** — revenue receipts growing in line with economic growth
FY 2023-24 data sourced from CAG was used for this edition.
Why did Odisha top the Fiscal Health Index 2026 among major states?
**Odisha** topped the major states category for the **second consecutive year** because of its: (1) low **debt-to-GSDP ratio**, (2) strong **own-tax revenue growth**, and (3) disciplined **capital expenditure**. Odisha has consistently maintained fiscal discipline through prudent borrowing and infrastructure-focused spending.
What are Rajasthan's main fiscal challenges as reflected in the FHI?
Rajasthan faces persistent **fiscal stress** due to: (1) high **power sector liabilities (DISCOM losses)**, (2) large **subsidy burden** including free electricity and other welfare schemes, (3) large **pension obligations**, and (4) high **revenue deficit**. Under the **FRBM Act**, Rajasthan has frequently sought **additional borrowing limits** from the Centre to fund its expenditure.
What is the significance of expenditure quality metrics in FHI 2026?
FHI 2026 was the **first edition** to incorporate **expenditure quality metrics**, specifically measuring the **ratio of capital expenditure to total expenditure**. This rewards states that invest in **physical infrastructure and human capital** rather than just current (revenue) expenditure. Higher capex ratios indicate better long-term economic multiplier effects.
What is the role of CAG in the Fiscal Health Index?
The **Comptroller and Auditor General (CAG)** of India is the primary data source for the Fiscal Health Index. CAG audits the accounts of the Union and state governments and publishes certified fiscal data including **revenue receipts, fiscal deficit, and debt levels**. NITI Aayog uses this CAG-certified data to ensure consistency and reliability across states.
