Punjab worst among 18 major states on Fiscal Health Index

The just released report on Fiscal Health Index (FHI) for 2022-23 by the NITI Aayog, the top think tank of the country, has confirmed the worst fears of policy makers in Punjab. The once most progressive state in the country, is now the most laggard, with the worst FHI in the country.

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The report, released on Friday, indicates that the state’s FHI score is the lowest at 10.7. Comparatively, top scorer Odisha has a score of 67.8. Even Punjab’s neighbouring states of Haryana and Rajasthan have scored FHI rankings of 27.4 and 28.6, respectively, though Haryana’s ranking is also among the five lowest performers. Punjab is clubbed with Andhra Pradesh, Kerala and West Bengal for low FHI score.

This FHI initiative is aimed at evolving an understanding of the fiscal health of states in the country. The analysis covers 18 major states that drive the Indian economy in terms of their contribution to the country’s GDP, demography, total public expenditure, revenue and overall fiscal stability.

It offers a systematic approach to assess the state’s fiscal health, identify areas for improvement and promote best practices across states. The composite FHI has been developed using data from the Comptroller and Auditor General (CAG) from financial year 2014-15 to 2022-23, focusing on five sub-indices: Quality of expenditure, revenue mobilisation, fiscal prudence, debt index and debt sustainability. The analysis highlights that strong revenue mobilisation, effective expenditure management and prudent fiscal practices are critical determinants of success.

A look at the report shows that of the five above-mentioned sub-indices, Punjab has been a laggard in “quality of Expenditure” (spending more on non-development expenditure), “fiscal prudence” (which gauges states ability to generate revenue independently and its fiscal independence) and “debt index” (where substantial part of revenue is used to pay interest on the accumulated debt). The only silver lining is that the state’s debt, according to the report is sustainable. Punjab’s outstanding public debt, as on December 2024, is Rs 3.71 lakh crore.

All four major political parties in Punjab were at the helm of affairs in the state, during the period for which the state’s fiscal health has been analysed. The Akali-BJP alliance was in power during 2014-2017, Congress during 2017-2022, while AAP assumed power in 2022.

This report has suggested that the path forward hinges on a commitment to transparency, better tax compliance and targeted investment in social and economic infrastructure.

“By fostering a culture of fiscal prudence and accountability, states can stabilise their economies and elevate the quality of life for their citizens, ensuring a resilient and prosperous future… concerted efforts can lead to transformative outcomes that benefit all,” it says.

SAD blames it on AAP

The SAD on Saturday said the Fiscal Health Index was a true reflection of the performance of CM Bhagwant Mann as well as depiction of the manner in which he had ruined the financial health of the state. Expressing shock at the latest findings, SAD leaders Bikram Singh Majithia and Dr Daljit Singh Cheema said, “CM Bhagwant Mann had promised to make Rangla Punjab, but he has turned it into Kangla Punjab.” They demanded that the CM and Finance Minister Harpal Cheema should submit their resignations after this damning indictment. The state had failed comprehensively on all five parameters listed in the index, they added.