NITI Aayog launched the Fiscal Health Index 2025 on January 24, 2025, ranking Indian states on the quality of their public finances. The Index assesses states on five key parameters: fiscal prudence (including fiscal deficit and revenue deficit), debt management, quality of expenditure, revenue mobilisation, and fiscal transparency.
Odisha and Chhattisgarh emerged as top performers in the Index, demonstrating strong fiscal management, low deficit levels, and high quality of capital expenditure relative to total spending. These states have consistently maintained discipline in revenue spending, reduced reliance on market borrowings, and improved own tax revenue mobilisation.
Rajasthan's fiscal position has been a subject of policy concern. The state has faced challenges with a high fiscal deficit relative to GSDP, rising debt stock, and significant committed expenditure obligations. Power sector dues, pension liabilities, and loan repayments to central schemes have added to fiscal stress. However, the state has initiated some corrective measures including rationalisation of subsidies and improved revenue collection.
The Fiscal Health Index is an important tool for competitive federalism — it creates peer pressure among states to improve financial governance, reduce wasteful expenditure, and increase capital investment. States with poor fiscal health face difficulties in accessing market borrowings at competitive rates and may see reduced allocation under central schemes.
For RPSC RAS aspirants, this index is relevant under public finance, federalism, and Rajasthan economy topics. Understanding fiscal deficit, GSDP ratios, and state debt dynamics is critical for the Mains paper.