CII launches new Index to measure fiscal performance
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  1. Confederation of Indian Industry(CII) has launched a Fiscal Performance Index(FPI).The index is an innovative tool using multiple indicators to study the quality of Budgets at the Central and State levels.
  2. The index has been constructed using UNDP’s Human Development Index methodology.
  3. The Index incorporates qualitative assessments of (a)revenue expenditure (b)capital expenditure (c)revenues (d)fiscal prudence and (d)level of public debt.CII has used this index to analyse state and central budgets from 2004-05 to 2016-17.
  4. The study has found that despite improvement in reduction in the fiscal deficit between FY13 and FY18,the overall performance of the budget has remained steady with improvements only in FY16 and FY17.This is largely due to moderation in the revenue,capital expenditure and net tax revenues indices.
  5. The analysis also shows that combine performance of all state budgets has improved despite worsening of fiscal deficit numbers because of improvements in revenue and capital expenditure indices.
  6. The study also points out that relatively high income states including Gujarat, Haryana and Maharashtra which have good fiscal health because of low fiscal deficit to GDP ratio do not perform well on the composite FPI because of poor expenditure and revenue quality compared to other states.
  7. Further,states such as Madhya Pradesh, Andhra Pradesh, Uttar Pradesh and Bihar have done well on the FPI because of their good performance in revenue and capital expenditure indices.
  8. The report concludes with recommendations that the government should (a)attempt to broaden the tax base and (b)increase investments in education and healthcare.

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