MP Ranks 9th In NITI Aayog’s FHI Index; Tax Revenue As A Percentage Of GSDP Has Declined From 13% In 2018-19 To 11% In 2022-23

Bhopal (Madhya Pradesh): The Fiscal Health Index (FHI) 2025 prepared by NITI Aayog has placed Madhya Pradesh on the ninth rank in final ranking of states for 2022-23. The FHI score of state is 42.2 and its quality of expenditure stands at 59.7.

With FHI score of 67.8, Odisha grabbed the first position, Chhattisgarh became 2nd (FHI score 55.2), Goa came third (FHI Score 53.6) with Punjab on the lowest 18th ranking with 10.7 FHI score. The Fiscal Health Index (FHI) initiative by NITI Aayog aimed to evolve an understanding of fiscal health of states in India. The FHI covers 18 major states that drive the Indian economy in terms of their contribution to India’s GDP.

As far as Madhya Pradesh’s Revenue Mobilisation is concerned, over the last five years, tax revenue as a percentage of GSDP has declined from 13% in 2018-19 to 11% in 2022-23. Whereas Non-Tax revenue as a per cent of GSDP has remained at 1. Tax and Non Tax revenue increased by 8% and 30% respectively in 2022-23 over the previous year.

The total revenue receipts as a percentage of GSDP has come down from 18% in 2018-19 to 15% in 2022-23. Under the head Fiscal Prudence, the report says that the state experienced a revenue surplus of .3% and a fiscal deficit of 3.3% in 2022-23 which are within the prescribed FRBM Limits. The surplus may be attributed to higher than expended Non Tax Revenue. Barring 2020-21 due to COVID-19, the state’s fiscal deficit ranged between 2.9% and 3.5% from 2018-19 to 2022-23. Between 2018-19 and 2022-23, the state experienced a revenue surplus in three years.

Debt Index and Debt Sustainability

Debt to GSDP has remained in the range 24-31% during 2018-19 to 2022-23, although there is a 14% increase in public debt in the current year over 2021-22.

Barring 2020-21, the majority of borrowed funds (75-90%) have been utilised for Capex, reflecting a strong focus on the creation of capital assets from 2018-23. Also, a considerable portion of borrowing were used for repayment of earlier borrowings.

In 2022, the average interest rate on outstanding borrowing was 7% which increased to 7.5% as of March 2023, increasing the expenditure on interest payment. The ratio of interest payments to revenue receipts was favourable ranging between 7.7% and 9.6% during 2018-23.

Quality of expenditure

The allocation towards social sector expenditure has been the highest under revenue expenditure whereas allocation towards economic services has been the highest under Capex from 2018-19 to 2022-23.

Capex as a percentage of total expenditure ranged between 17% to 18% in last 5 years. In 2022-23, the state allocated 41% of its revenue expenditure as a ratio of total expenditure towards the social sector and 27% towards the economic sector.