New Delhi, Mar 12 (KNN) NITI Aayog has urged state governments to adhere to fiscal deficit limits under the Fiscal Responsibility and Budget Management Act (FRBM Act) through disciplined expenditure management, expansion of the GST base and stronger tax mobilisation.
The recommendation is part of the Fiscal Health Index (FHI) 2026 which evaluated the fiscal performance of states for FY 2023–24.
The index ranks Odisha, Goa, Jharkhand, Gujarat, Maharashtra, Chhattisgarh, Telangana, Uttar Pradesh, Karnataka and Madhya Pradesh among the top 10 fiscally sound states in the country.
Among northeastern and Himalayan states, Arunachal Pradesh topped the index, followed by Uttarakhand, Tripura, Meghalaya, Assam and Mizoram.
Meanwhile, Punjab, West Bengal and Kerala remained at the bottom of the fiscal health rankings, though Bihar, Karnataka and Telangana showed a mild recovery in their fiscal position.
The FHI 2026 report said higher-ranked states generally demonstrate stronger fiscal discipline and better resource mobilisation, while lower-ranked states tend to have higher non-developmental expenditure and weaker fiscal sustainability.
Releasing the report, Suman Bery, Vice Chairman of NITI Aayog, highlighted the importance of maintaining fiscal buffers amid economic uncertainties.
The report recommended that states align revenue expenditure with sustainable revenue growth, especially those facing widening revenue deficits.
It also advised states to strengthen fiscal frameworks by broadening GST bases, enhancing their own tax capacity and curbing committed expenditure to restore fiscal flexibility.
Other recommended measures include rationalising subsidies, adopting standard expenditure classifications, improving the quality of capital spending and implementing medium-term fiscal plans to stabilise debt and contain deficits.
For fiscally stressed states, the report suggested targeted consolidation measures, including tighter control over off-budget borrowings and improved cash and debt management.
The Fiscal Health Index assesses states across five sub-indices, quality of expenditure, revenue mobilisation, fiscal prudence, debt index and debt sustainability, to provide a comprehensive view of their fiscal performance.
(KNN Bureau)
2012-01-26
