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In a remarkable achievement that underscores its commitment to fiscal discipline and economic stability, Odisha has topped the charts in NITI Aayog’s inaugural Fiscal Health Index (FHI) for the year 2025. This index, which assesses the fiscal performance of 18 major Indian states, has placed Odisha as the leading ‘achiever’ among its peers, showcasing the state’s robust economic strategies and sustainable financial management.
Understanding the Odisha Fiscal Health Index
The Fiscal Health Index 2025, released on January 24, 2025, by NITI Aayog, evaluates the fiscal health of states based on several key parameters including Quality of Expenditure, Revenue Mobilisation, Fiscal Prudence, Debt Index, and Debt Sustainability. These indices provide a comprehensive view of a state’s financial management, economic growth, and future financial stability. The report covers the fiscal year 2022-23 and looks back at the fiscal trends from 2014-15 to 2021-22, sourced from the Comptroller and Auditor General (CAG).
Odisha Fiscal Health: Leading Scores in FHI
Odisha has not only topped the list with an impressive overall index score of 67.8 but has also excelled in specific categories:
- Debt Index: With a score of 99.0, Odisha’s debt management practices are among the best in the country, reflecting a low fiscal deficit and a manageable debt profile.
- Debt Sustainability: Scoring 64.0 in this category, Odisha shows it can sustain its current debt levels without compromising future fiscal health.
Fiscal Strategies and Odisha Fiscal Health Growth
Odisha’s success in the FHI can be attributed to several strategic fiscal policies:
- Higher Capital Outlay: Up to 4% of the Gross State Domestic Product (GSDP) has been allocated to capital expenditure, which drives infrastructure development and economic growth.
- Effective Revenue Mobilisation: Particularly in non-tax revenues, Odisha has managed to increase its revenue sources, reducing dependency on central funds.
- Revenue Surplus: The state has maintained a revenue surplus, indicating sound fiscal management and low fiscal deficits.
- Low-Interest Payments: By keeping interest payments at up to 7% of revenue receipts, Odisha ensures that a significant portion of its revenue can be directed towards development rather than debt servicing.
Comparative Analysis with Other States
While Odisha leads, other states like Chhattisgarh and Goa follow with scores of 55.2 and 53.6, respectively, also categorizing them as top performers or ‘achievers’. In contrast, states like Punjab, Andhra Pradesh, West Bengal, and Kerala have been identified as ‘aspirational’, facing significant fiscal challenges. This disparity highlights the varying levels of fiscal health across India and underscores the need for tailored fiscal strategies.
- Maharashtra, Uttar Pradesh, Telangana, Madhya Pradesh, and Karnataka, while not at the top, are noted for their high developmental expenditure, which constitutes up to 73% of their total expenditure.
- Tamil Nadu, Bihar, Rajasthan, and Haryana have shown moderate fiscal health, with areas of improvement in revenue sharing and debt management.
- Kerala, West Bengal, Andhra Pradesh, and Punjab are marked by low revenue mobilization, high fiscal deficits, and concerns over debt sustainability.
Impact on Odisha’s Development
Odisha’s position at the top of the Fiscal Health Index is not just a mark of financial acumen but a beacon for sustainable development. The state’s ability to manage its finances effectively allows for more investments in public welfare, infrastructure, and economic diversification, setting a benchmark for economic resilience and growth.
Looking Forward
This achievement by Odisha in the Fiscal Health Index 2025 sets a precedent for fiscal governance in India. With such a strong foundation, Odisha is well-positioned to continue its path of economic development, potentially influencing other states to adopt similar strategies for fiscal health and economic sustainability.
