NITI Aayog asks states to strengthen fiscal discipline
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New Delhi: NITI Aayog on Wednesday urged state governments to adhere to fiscal deficit norms under the Fiscal Responsibility and Budget Management Act through disciplined expenditure management, widening the GST base and strengthening their own tax capacity.
The Fiscal Health Index (FHI) 2026 for 2023-24 said states with widening revenue deficits should prioritise aligning revenue expenditure with sustainable revenue growth.
According to the index, Odisha, Goa, Jharkhand, Gujarat, Maharashtra, Chhattisgarh, Telangana, Uttar Pradesh, Karnataka and Madhya Pradesh emerged as the top 10 fiscally strong states.
However, Punjab, West Bengal and Kerala remained at the bottom of the index, while Bihar, Karnataka and Telangana showed a mild recovery. In the previous FHI released in 2025, which assessed states for 2022-23, Odisha ranked first, followed by Chhattisgarh, Goa, Jharkhand and Gujarat. Among north-eastern and Himalayan states, Arunachal Pradesh topped the index, followed by Uttarakhand, Tripura, Meghalaya, Assam and Mizoram.
Releasing the report, Suman Bery, Vice Chairman of NITI Aayog, said maintaining strong fiscal health allows governments to build buffers against domestic and global economic shocks.
The report recommended strengthening fiscal frameworks by improving revenue mobilisation, mainly by broadening the GST base and increasing states’ own tax capacity while curbing committed expenditure.
It also suggested rationalising subsidies, improving the quality of capital spending, adopting standard expenditure heads and preparing medium-term fiscal plans to stabilise debt levels.
States facing persistent fiscal stress should implement targeted consolidation measures, including tighter control over off-budget borrowings and improved cash and debt management.
