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Question

Fiscal Health Index 2025 published by the NITI Aayog provides a comprehensive assessment of fiscal health of 18 major States based on which of the following key sub-indices?
1. Quality of expenditure
2. Debt index
3. Debt sustainability
4. Fiscal prudence
5. Revenue mobilisation
Select the answer using the codes given below :

The correct answer is
1, 2, 3, 4 and 5

The question asks which key sub-indices are part of the Fiscal Health Index 2025 published by the NITI Aayog. Let's analyze the statements provided in the answer options to determine the correct one.

Analysis of Sub-Indices:

  1. Quality of Expenditure: This refers to how effectively and efficiently the government spends its resources to achieve desired outcomes. It assesses the prioritization and execution of expenditures to maximize utility and impact, making it a valid component of fiscal health.
  2. Debt Index: This measures the level and structure of state debts, evaluating how much and on what terms a state owes others, critical for understanding fiscal health.
  3. Debt Sustainability: This examines whether a state can sustain its current level of debt without external assistance, important for long-term fiscal stability.
  4. Fiscal Prudence: This assesses the discipline with which a state manages its finances, ensuring it's living within its means and adhering to fiscal rules, ensuring long-term fiscal health.
  5. Revenue Mobilisation: This measures a state's ability to generate revenue through taxes and other sources. Effective revenue collection is crucial for maintaining fiscal health.

Now, we examine the options to determine which ones include all the sub-indices mentioned above.

  1. The option "1, 3 and 5 only" does not include all the key sub-indices.
  2. The option "2 and 4 only" is incomplete as it misses other critical sub-indices like Quality of Expenditure and Revenue Mobilisation.
  3. The option "2, 4 and 5 only" also misses some key indices like Quality of Expenditure and Debt Sustainability.
  4. The option "1, 2, 3, 4 and 5" includes all the listed sub-indices, covering every aspect of fiscal health metrics as defined by the NITI Aayog.

Conclusion: The correct answer is "1, 2, 3, 4 and 5", as this option comprehensively covers all the key sub-indices that guide the Fiscal Health Index 2025. The indices collectively provide a holistic assessment of a state's fiscal health, covering all necessary aspects from expenditure quality to revenue mobilization and debt management.

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