Study of Fiscal Health in Selected States in India

Abstract

This policy report conducts a comparative analysis of the fiscal health of four Indian states—Punjab, Kerala, Odisha, and Gujarat—between 2014-15 and 2024-25. The study evaluates fiscal performance using key policy-relevant indicators such as capital outlay as a % of GSDP, own tax revenue as a % of GSDP, state own revenue as a % of total expenditure, fiscal deficit as a % of GSDP, revenue deficit as a % of GSDP, interest payment to the revenue receipt, and outstanding liabilities as a % of GSDP. The objective is to analyze trends in key indicators and study their fiscal stability across selected Indian states. Findings reveal that while Punjab and Kerala exhibit high fiscal stress due to high outstanding liabilities and debt servicing burdens violating FRBM targets, Odisha and Gujarat have managed their public finances more prudently, maintaining FRBM compliance, focusing on capital expenditure, and maintaining lower interest liabilities. The report draws upon official data from RBI, PRS, NITI Aayog, the Fiscal Health Index Report (2024-25), and state fiscal strategy documents. Based on the trends, the study recommends a policy approach for high-debt states, focused on improved fiscal transparency, debt quality enhancement, and greater emphasis on development-oriented expenditure.