NITI Aayog Releases Fiscal Health Index 2026 to Benchmark State Finances

With global public finances facing increasing pressure, the report highlights the growing importance of sustainable fiscal management at sub-national levels.

NITI Aayog has released the second edition of the Fiscal Health Index (FHI) 2026, a data-driven framework designed to assess and compare the fiscal performance of Indian states and guide reforms for stronger public finance management.

The report was unveiled in New Delhi by NITI Aayog Vice-Chairman Shri Suman Bery and CEO Smt. Nidhi Chhibber, in the presence of senior officials.

Comprehensive Tool to Assess State Finances

The Fiscal Health Index provides a systematic evaluation of the fiscal soundness of state governments by analysing key financial indicators. It aims to promote evidence-based fiscal policymaking, improved resource allocation, and long-term macroeconomic stability.

With global public finances facing increasing pressure, the report highlights the growing importance of sustainable fiscal management at sub-national levels.

In India’s fiscal structure, state governments play a major role in public expenditure and service delivery. States now account for nearly one-third of the country’s general government debt, making their fiscal trajectory crucial to national financial stability.

Expanded Coverage in Second Edition

The 2026 edition expands the scope of the index. While the first edition evaluated 18 major states, the latest report includes 10 North-Eastern and Himalayan states, making the analysis more comprehensive and representative of India’s regional diversity.

To account for structural and economic differences, the North-Eastern and Himalayan states have been evaluated and ranked separately from the major states.

Variations in Fiscal Performance Across States

The report reveals significant variations in fiscal outcomes across states.

Among the 18 major states, many recorded moderate Fiscal Health Index scores in 2023–24, reflecting emerging fiscal pressures.

Similarly, the North-Eastern and Himalayan states also show wide differences in fiscal performance due to variations in economic structures, revenue bases and expenditure responsibilities.

Key Policy Recommendations

The report identifies several priority areas for improving fiscal health across states:

• Strengthening revenue mobilisation, particularly enhancing states’ own tax capacity

• Rationalising committed expenditures to improve fiscal flexibility

• Improving the quality and composition of capital expenditure

• Adopting medium-term fiscal planning frameworks to better manage deficits and debt

It also recommends improving public financial management systems, enhancing transparency through verified fiscal data, and closely monitoring off-budget borrowings.

Strengthening Fiscal Governance

Speaking at the release, Suman Bery emphasised that stronger fiscal governance at the state level is critical to maintaining India’s macroeconomic stability and sustaining economic growth.

He noted that benchmarking tools such as the Fiscal Health Index help states identify structural fiscal challenges and design targeted policy reforms.

Nidhi Chhibber highlighted that strengthening fiscal resilience across states will be essential to support long-term development and reduce regional disparities.

Supporting Evidence-Based Policy

The Fiscal Health Index 2026 serves as a valuable resource for policymakers, researchers and public finance experts by offering a transparent and data-driven analysis of state finances.

Through its benchmarking framework and policy insights, the index aims to support informed fiscal decision-making and sustainable public finance management across India’s states.