The second edition of Fiscal Health Index (FHI) 2026 released by NITI Aayog which ranks Arunachal Pradesh highest among Northeastern states; Assam ranks fifth.

• The FHI 2026 expanded coverage to include North-Eastern and Himalayan states.
  • The 10 North-Eastern and Himalayan states, evaluated and ranked separately apart from major states.

What is the Fiscal Health Index (FHI)?

• A composite index developed by NITI Aayog to assess fiscal performance of states.
• States are categories into categories, namely, Achiever, Front Runner, Performer, Aspirational.
• Uses Comptroller and Auditor General (CAG)-verified data.
• Analyses trends from Financial Year 2014–15 to 2023–24.
• The NE & Himalayan States have been ranked separately from the major states and classified into three groups i.e. Achievers, Performers & Aspirational
• Aims to promote:
  • Evidence-based policymaking
  • Fiscal discipline and transparency
  • Inter-state comparison and reform

Ranking of  North Eastern (NE) /Himalayan States (i) Achievers: Arunachal Pradesh, Uttarakhand (ii) Performers: Assam, Meghalaya, Mizoram, Sikkim, Tripura (iii) Aspirational: Himachal Pradesh, Manipur, Nagaland

Key Pillars 

FHI evaluates states on five core indicators:

• Quality of Expenditure – focus on productive/development spending
• Revenue Mobilisation – ability to generate own revenue
• Fiscal Prudence – control over deficit and spending
• Debt Index – level of public debt
• Debt Sustainability – ability to manage and repay debt

Special Focus: Northeastern & Himalayan States

• Ranked separately due to unique challenges:
  • Geographical remoteness
  • Low population density
  • High dependence on central transfers
• Sub-indicators adjusted for regional realities

Key Findings

• Arunachal Pradesh (59.5) – top performer:
  • Strong quality of expenditure and fiscal discipline
• Uttarakhand (52.5) – high revenue mobilisation
• Meghalaya (41.5) – balanced debt and expenditure
• Assam (39.1) – mixed performance:
  • Strong revenue mobilisation
  • Weak fiscal prudence
• Bottom Rankers: Himachal Pradesh and Manipur

Assam’s Fiscal Profile

• Revenue growth: Increased significantly (2020–2024)
• High dependence on central transfers (~38%)
• Rising debt and interest burden
• Gross Fiscal Deficit showed partial improvement
• High committed expenditure limits flexibility

Significance

• Helps states improve fiscal governance & budget efficiency
• Supports broader frameworks like Fiscal Responsibility and Budget Management Act, 2003
• Encourages competitive federalism

Key Takeaways

• FHI = tool for measuring fiscal strength and sustainability
• Highlights regional disparities in fiscal capacity
• Assam needs to improve fiscal discipline despite good revenue growth

Exam Hook

Consider the following statements:

1. Fiscal Health Index is released by NITI Aayog.
2. It uses data verified by the Comptroller and Auditor General.
3. It evaluates states only on revenue mobilisation.

Which of the statements are correct?
(a) 1 and 2 only
(b) 2 and 3 only
(c) 1 and 3 only
(d) 1, 2 and 3

Answer: (a) 1 and 2 only

One-line wrap: Fiscal Health Index 2026 provides a comprehensive measure of states’ financial stability, guiding reforms and strengthening fiscal governance in India.

SOURCE