03 April 2025: PIB Summary For UPSC

1. Fiscal Health Index 2025

(Source – https://pib.gov.in/PressReleasePage.aspx?PRID=2117890 )

Introduction

• Odisha ranks first, followed by Chhattisgarh, Goa, Jharkhand, and Gujarat.
• Since states handle two-thirds of public spending and one-third of total revenue, their financial health is crucial for the nation’s economic stability.
• The index, based on data from the Comptroller and Auditor General of India (CAG), covers the Financial Year 2022-23.

Objectives of the Fiscal Health Index

• To compare states’ fiscal health using standardized indicators.
• To identify strengths and weaknesses in financial management.
• To promote transparency, accountability, and better fiscal governance.
• To assist policymakers in making informed financial decisions.

Key Indicators Evaluated

1. Tax Buoyancy

• Measures how well tax revenue grows in relation to economic growth.
• Evaluates states’ revenue collection efficiency.

2. Debt-to-GSDP Ratio

• Compares a state’s total debt to its Gross State Domestic Product (GSDP).
• Indicates a state’s ability to repay debts.

3. Expenditure Management

• Assesses efficiency in spending allocation and fiscal discipline.
• Focuses on prioritization of capital expenditure.

4. Debt Management

• Examines states’ debt levels, interest payments, and sustainability.

5. Fiscal Deficit Management

• Evaluates fiscal deficit as a percentage of GSDP and compliance with statutory limits.

6. Overall Fiscal Sustainability

• Provides a holistic assessment of revenue, expenditure, debt, and deficit.

Key Findings

• Odisha ranks first (67.8), excelling in debt sustainability and fiscal management.
• Chhattisgarh (55.2) and Goa (53.6) follow, excelling in revenue generation and debt control.
• Non-tax revenue mobilization is highest in Odisha, Jharkhand, Goa, and Chhattisgarh, contributing 21% of total revenue.
• States facing fiscal challenges include Punjab, Andhra Pradesh, West Bengal, and Kerala, struggling with high deficits and poor debt sustainability.
• Capital expenditure allocation is highest (27%) in states like Madhya Pradesh, Odisha, Goa, Karnataka, and Uttar Pradesh.
• West Bengal, Andhra Pradesh, Punjab, and Rajasthan allocate only 10% of their expenditure to capital investments.
• Rising debt concerns exist for West Bengal and Punjab, with increasing debt-to-GSDP ratios.

Debt Sustainability

• Ensures states can repay debts without defaulting or requiring financial aid.
• Odisha, Chhattisgarh, and Goa perform best in debt management.
• Punjab, Andhra Pradesh, West Bengal, and Kerala face challenges in debt sustainability.

Conclusion

• The Fiscal Health Index 2025 helps states monitor financial stability and performance.
• It emphasizes the need for strong revenue generation, debt control, and efficient spending.
• The report has been shared with all States/UTs to guide them toward sustainable fiscal practices.
• States must focus on fiscal prudence and responsible financial management to ensure long-term economic stability.

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