Thiruvananthapuram: Kerala has ranked among the lowest-performing states in NITI Aayog’s Fiscal Health Index, securing the 15th position out of 18 major states. The index, which assesses the financial health of Indian states, highlights Kerala’s ongoing struggles with expenditure management despite improvements in revenue collection.
According to the 2025 Fiscal Health Index, which is based on data from FY 2022-23, Odisha emerged as the top-performing state with a score of 67.8, while Kerala lagged far behind at 25.4. The report categorizes states into four groups, with Kerala, alongside Haryana, West Bengal, Andhra Pradesh, and Punjab, placed in the lowest “aspirational” category.
Factors Contributing to Kerala’s Low Ranking
One of the key reasons for Kerala’s poor performance is its high government spending on non-developmental expenses. A significant portion of the state’s budget—63.9%—is allocated to unavoidable expenditures such as salaries, pensions, and interest payments, leaving only 8.8% available for infrastructure and other developmental projects. In contrast, other states allocate an average of 15.2% of their budgets to development.
Although Kerala’s spending on health and family welfare (6.4%) is slightly above the national average of 5.6%, its education expenditure stands at 14%, which is marginally lower than the national average of 14.9%. The state also recorded the lowest score in “Quality of Expenditure,” one of the five key evaluation criteria in the report.
Revenue Growth and Financial Performance
Despite its ranking in the index, Kerala has demonstrated strong revenue generation. It secured the sixth position in revenue mobilization, showing an average annual growth rate of 7.3% over the past five years. The state’s own revenue increased by 26.5%, with tax revenue rising by 23.3% and non-tax revenue—mainly driven by lottery sales—growing by 44.5%.
Statewise Rankings in the Fiscal Health Index
The top-performing states in the index were Odisha, Chhattisgarh, and Goa, while Punjab ranked the lowest with a score of just 10.7. Kerala, despite a slight improvement from 16th to 15th place, remains among the weakest states in terms of fiscal health.
Top 10 States in Fiscal Health Index:
- Odisha – 67.8
- Chhattisgarh – 55.2
- Goa – 53.6
- Jharkhand – 51.6
- Gujarat – 50.5
- Maharashtra – 50.3
- Uttar Pradesh – 45.9
- Telangana – 43.6
- Madhya Pradesh – 42.2
- Karnataka – 40.8
States with Low Fiscal Performance:
- Tamil Nadu – 29.2
- Rajasthan – 28.6
- Bihar – 27.8
- Haryana – 27.4
- Kerala – 25.4
- West Bengal – 21.8
- Andhra Pradesh – 20.9
- Punjab – 10.7
The report raises concerns over Kerala’s long-term financial sustainability, especially if expenditure patterns remain unchanged. Experts suggest that the state must focus on reducing non-productive expenses and increasing investment in developmental projects to improve its fiscal health.
