NITI Aayog Releases Fiscal Health Index 2026 to Assess State Finances

Second Edition of Fiscal Health Index Evaluates Fiscal Performance of Indian States

The NITI Aayog has published the second edition of the Fiscal Health Index (FHI) 2026 , a report designed to evaluate the fiscal performance of Indian states. The report was released in New Delhi by Suman Bery and Nidhi Chhibber. The index provides a data-based framework for assessing fiscal sustainability, encouraging transparency and supporting evidence-driven policymaking at the state level.

Objective of the Fiscal Health Index

The Fiscal Health Index aims to provide a structured and comparable evaluation of the financial condition of state governments. Since states play a major role in delivering public services and implementing development programmes, their fiscal stability has a direct impact on the country’s economic health.

State governments together account for about one-third of India’s general government debt , making prudent fiscal management essential for maintaining long-term macroeconomic stability.

Expanded Coverage in the 2026 Report

The 2026 edition expands the scope of the index by including North-Eastern and Himalayan states , which were not covered in the first edition. While the earlier report assessed 18 major states , the new edition includes ten additional states from these geographically distinct regions.

Due to structural differences in their economic conditions and fiscal capacities, these states have been evaluated separately to ensure fair comparisons and meaningful analysis.

Key Findings

The report indicates significant variation in fiscal performance across states . Several of the 18 major states recorded moderate fiscal scores during the 2023–24 financial year , reflecting evolving fiscal pressures such as rising expenditures and changing revenue patterns.

Similarly, the North-Eastern and Himalayan states displayed diverse fiscal outcomes , largely influenced by differences in economic structure, revenue mobilisation and spending priorities.

Policy Recommendations

The report recommends several measures to strengthen fiscal sustainability at the state level. These include improving revenue mobilisation, enhancing state tax capacity, rationalising committed expenditures and increasing the quality of capital expenditure .

It also emphasises the need for medium-term fiscal planning, stronger public financial management systems and greater transparency in fiscal reporting . Monitoring off-budget borrowings and maintaining fiscal discipline will be essential for supporting sustainable public finances and long-term economic development.

Exam-Focused Points

• NITI Aayog was established in 2015 .

• The Fiscal Health Index (FHI) evaluates the fiscal performance of Indian states .

• State governments account for around one-third of India’s general government debt .

• The 2026 edition expanded coverage to include North-Eastern and Himalayan states .

• Fiscal health measures the sustainability of government finances including revenue, expenditure, debt and deficits .