'Odisha has best budget among general category states'

A comprehensive analysis of state budgets for 2024-25 reveals interesting patterns in fiscal management across India's 17 general category states.

Using the newly developed "Index of Budgetary Evaluation (IBE)", when various fiscal parameters are assessed to rank states based on their budgetary performance, Odisha emerges as the top performer with an IBE score of 80.88, showcasing exemplary fiscal management.

The IBE considers two main components — improvement index and deprivation index. The improvement index looks at positive indicators like revenue efficiency, expenditure quality, capital outlay and budget size. The deprivation index examines challenging areas such as revenue deficit, fiscal deficit, outstanding debt and interest payment obligations.

Odisha's success can be attributed to high-quality public spending, robust capital outlay, lower deficit levels, minimal outstanding debt and reduced interest payment burden.

Jharkhand secured the second position with a score of 75.71, primarily due to low fiscal deficit and substantial budget size. Uttar Pradesh ranked third with 66.88 points, standing out for significant capital outlay and large budget size.

On the other hand, some traditionally strong economic states showed concerning trends. Tamil Nadu, Kerala, Punjab and West Bengal recorded the lowest IBE scores among the studied states, indicating potential areas for fiscal improvement.

The analysis is based on data from state budget documents and the Reserve Bank of India. Efficient revenue generation, quality of public expenditure and asset creation through capital spending are important for any state. Responsible debt management and sustainable interest payment obligations are the key.

For Odisha, this being the new govt's first budget, the high IBE score suggests a promising start. Maintaining this fiscal discipline could pave the way for enhanced growth and employment opportunities in the state.

The analysis highlights the varying fiscal capacities across states and underscores the continuing need for balanced resource distribution from the Union govt to maintain federal harmony and reduce economic disparities.

This evaluation serves as a valuable tool for policymakers and citizens to understand their state's fiscal health and compare it with others, potentially leading to more informed policy decisions and better fiscal management practices.

(The writer is a professor in finance at XIMB, XIM University)