As NITI Aayog CEO Nidhi Chhibber notes in her foreword to the report, India’s fiscal landscape is marked by wide diversity across states in economic structure, revenue capacity, expenditure priorities and institutional constraints. While some states have made progress in improving expenditure quality and scaling up capital investment, others face structural pressures from rigid spending commitments, limited ability to raise their own revenues, and rising debt. It is precisely this variation, she writes, that makes a systematic, comparable, and evidence-based assessment of state finances necessary.
The index classifies states into four tiers. ‘Achievers’ are states with strong fiscal discipline, high own-tax revenues, low deficits, and manageable debt; ‘Front Runners’ maintain broadly sound finances but fall short of the top tier on one or more indicators; ‘Performers’ occupy the middle ground, with mixed results across the five pillars;. ‘Aspirational’ states are those facing the most significant fiscal stress, characterised by persistent deficits, high debt, and limited revenue capacity.
Odisha retains first place with a score of 73.1, up from 67.4 in the previous edition. Its Debt Index score of 95.8 is the highest of any state, reflecting outstanding liabilities of around 18 per cent of GSDP and an interest burden of approximately 6 per cent of revenue receipts. Goa ranks second with 54.7, and Jharkhand third with 50.5. Gujarat and Maharashtra take fourth and fifth place with scores of 49.9 and 45.0 respectively.
Haryana is among the few states to have improved, rising three places in the overall rankings on the back of better revenue mobilisation and expenditure control. Bihar has been re-classified from ‘Aspirational’ to ‘Performer’ on fiscal prudence after recording a revenue surplus in 2023-24, though the report notes its revenues remain heavily dependent on Union transfers and its outstanding liabilities have risen to 38.9 per cent of GSDP. Jharkhand and Uttar Pradesh have been upgraded to ‘Achiever’ status on the quality of expenditure sub-index.
Chhattisgarh’s fiscal prudence score has fallen from 56.0 in 2022-23 to 7.4 in 2023-24 which the report attributes to a rise in welfare-linked spending. The state has dropped from second to sixth in the overall rankings. Karnataka and Telangana have been reclassified from ‘Front Runner’ to ‘Performer’ on fiscal prudence. Kerala and Tamil Nadu have moved into the ‘Aspirational’ category on the same pillar. Rajasthan has slipped in overall rank as its fiscal indicators reveal weakening.
Odisha, Goa, and Telangana retain ‘Achiever’ status on revenue mobilisation. On the quality of expenditure sub-index, Madhya Pradesh, Bihar, Chhattisgarh, and Odisha retain ‘Achiever’ status, while Jharkhand, Telangana, and Uttar Pradesh join the category. Gujarat, Rajasthan, and Andhra Pradesh have advanced from ‘Performer’ to ‘Front Runner’ on that same pillar.
The report highlights diverging debt paths across states. Punjab’s outstanding liabilities have climbed steadily to exceed 48 per cent of GSDP, with interest payments above 20 per cent of revenue receipts. Andhra Pradesh’s outstanding liabilities increased by over 60 per cent between 2019-20 and 2023-24. Kerala’s liabilities have persisted above 37 per cent of GSDP, with interest payments absorbing around 22 per cent of revenues.
Among better-placed states, Gujarat has reduced its liabilities from 19.5 to 14.3 per cent of GSDP since 2019-20. Goa, however, has seen liabilities rise from 22.6 per cent of GSDP in 2015-17 to 29.3 per cent in 2023-24, with its interest burden doubling from around 6 per cent to over 10 per cent of revenue receipts over the same period. The report notes that no state has entered the top tier of the Debt Index this year.
For the first time, the index covers 10 North Eastern and Himalayan states, ranked separately. Arunachal Pradesh tops that group, followed by Uttarakhand and Tripura. Himachal Pradesh and Manipur rank at the bottom, carrying debt levels of roughly 40 to 50 per cent of GSDP. Central transfers account for 60 to 90 per cent of revenues in these states, compared with 30 to 50 per cent for the major states.
The report notes that state government debt now accounts for nearly one-third of India’s total general government debt. It attributes recent debt accumulation across states to rising subsidies, interest payments, and committed expenditure — spending pre-allocated to salaries, pensions, and statutory transfers that cannot easily be reduced in the short term. Globally, the report cites International Monetary Fund data showing total public debt on course to approach 100 per cent of world GDP by the end of the decade.
The index recommends that states broaden their GST base, improve own-tax collection, rationalise subsidies, adopt medium-term fiscal plans, and exercise tighter control over off-budget borrowings — debt incurred through state-owned entities that does not always appear in headline deficit figures.
(Edited by Nardeep Singh Dahiya)
