Fiscal Health of Indian States: A Comparative Analysis of Expenditure Priorities and Public Welfare

Abstract: This study examines the fiscal health and expenditure priorities of selected Indian states and analyzes their relationship with public welfare outcomes. In India's federal financial system, state governments play a crucial role in implementing welfare programs, infrastructure development, education, healthcare services, and social protection schemes. The study aims to evaluate how variations in revenue capacity, fiscal deficit, debt burden, and expenditure composition influence developmental outcomes across states. A comparative analysis was conducted using secondary data collected from official sources such as Reserve Bank of India reports, State Finance Accounts, and government statistical publications for the financial year 2023-2024. The research employs percentage analysis, correlation analysis, Chi-square test, ANOVA, and Z-score standardization methods to assess fiscal performance and welfare outcomes. Composite indices were constructed to rank states based on fiscal health and welfare indicators including literacy rate, life expectancy, poverty rate, and infant mortality rate. The findings reveal significant inter-state disparities in fiscal management and welfare performance. While capital expenditure shows a positive association with economic growth, higher revenue capacity and fiscal strength do not necessarily guarantee improved welfare outcomes. Statistical tests indicate that differences in fiscal categories and revenue capacity groups are not significant at the 5 percent level, suggesting that governance efficiency and policy implementation also play a vital role in determining welfare performance.

Keywords: Fiscal Deficit, Revenue capacity, expenditure composition and welfare outcomes