Government think tank Niti Aayog has urged state governments to strictly adhere to prudent fiscal deficit guidelines under the Fiscal Responsibility and Budget Management (FRBM) Act, through disciplined expenditure management, broadening the GST base, and boosting their own tax capacity by curbing committed expenditure to restore fiscal flexibility. It noted that the FRBM Act aims to regulate the country's debt level by restricting fiscal and revenue deficits as a percentage of GDP. It said rationalising subsidies, adopting standard expenditure heads, improving the quality and composition of capital spending, and adopting medium-term fiscal plans can help contain deficits and stabilise debt trajectories. 

The Fiscal Health Index (FHI) 2026 for the financial year 2023-24, released by Niti Aayog Vice Chairman Suman Bery, suggested that states with widening revenue deficits should prioritise aligning revenue expenditure with sustainable revenue growth. According to the index, Odisha, Goa, Jharkhand, Gujarat, Maharashtra Chhattisgarh, Telangana, Uttar Pradesh, Karnataka and Madhya Pradesh have emerged as India's top 10 fiscally-wise states. However, Punjab, West Bengal and Kerala remained at the bottom of the index, while Bihar, Karnataka and Telangana showed a mild recovery. In the previous FHI released in 2025, which ranked states based on their fiscal situation during 2022-23, Odisha ranked first, followed by Chhattisgarh, Goa, Jharkhand and Gujarat. 

The FHI 2026 report said overall, higher-ranked states display stronger fiscal discipline and resource mobilisation efforts, while lower-ranked states exhibit higher non-developmental expenditure and less sustainable fiscal patterns. It said among north-eastern and Himalayan states, Arunachal Pradesh has topped in the index, followed by Uttarakhand, Tripura, Meghalaya, Assam and Mizoram.