SHOWING A MIRROR TO STATES

All about the index

- DIPAK MONDAL @ New Delhi

ERALA — a state with first world social indicators — has for years come under severe criticism for fiscal mismanagement. The state, which maintains a high fiscal deficit (revised estimate of 3.5% in FY25), scores poorly in quality of expenditure, and debt sustainability.

The state's committed expenditure — salaries, pension and interest payments — account for 55% of its total expenditure (as per revised estimate for FY25). It spent a tiny sum of ₹14,000 crore out of total expenditure budget of ₹1.79 lakh crore, or just 8% of its total expenditure in FY25. Interest payments gobble up 22% of Kerala's net receipt. Its total outstanding debt is 33% of the GSDP (compared to 15% in Gujarat, 18% in Maharashtra and 26% in Tamil Nadu) and fiscal deficit is 3.5% (compared to less than 3% in many better fiscally-run states).

No wonder in a recent event, finance minister Nirmala Sitharaman said that states which consider themselves developed are ridden with debt.

With these stats, it is no surprise that Kerala ranks among the lowest in the Niti Aayog's latest Fiscal Health Index 2025, which was released recently. Kerala ranks among the worst four states in the index, which according to the Niti Aayog is 'a valuable tool for assessing the fiscal performance of Indian states'. Most southern states have cut a sorry figure on the index — which ranks 18 Indian states for their fiscal performance based on a set of five key indicators.

Niti Aayog, the government think tank that has replaced the erstwhile Planning Commission, has launched the index to evolve an understanding of the fiscal health of states in India, and assess their fiscal sustainability in the long term.