Mixed fiscal health across Northeast states: Arunachal leads, Meghalaya stable but uneven

Guwahati: The fiscal health of Northeast states presents a mixed picture, with strong performers like Arunachal Pradesh contrasting with structurally constrained economies, according to the latest Fiscal Health Index (FHI) 2026 released by NITI Aayog.

For the first time, the report provides a separate assessment of Northeast and Himalayan states, placing Arunachal Pradesh in the top “Achiever” category, while Assam and Meghalaya are classified as “Performers,” signalling moderate but uneven fiscal strength.

The report highlights the strategic importance of these states, noting that their fiscal stability carries national implications. As India’s natural frontier, the region plays a critical role in regional trade, border security, and connectivity with Southeast Asia, while also serving as an ecological backbone with vast biodiversity and key river systems.

Wide variations across the region

Fiscal performance across the Northeast varies sharply. Arunachal Pradesh leads with strong expenditure quality and prudent debt management, while Uttarakhand benefits from higher own-revenue mobilisation, and Tripura shows strength in debt sustainability.

On the other hand, Meghalaya, Assam, Mizoram, Sikkim, and Tripura fall in the “Performer” category, reflecting a mix of strengths and gaps in revenue mobilisation, fiscal discipline, and expenditure quality.

States such as Himachal Pradesh, Manipur, and Nagaland remain in the “Aspirational” category, constrained by high committed expenditure and weak revenue bases.

Meghalaya: balanced but constrained

For Meghalaya, the report points to a mixed yet relatively stable fiscal profile. The state has improved in developmental spending and capital outlay, critical indicators of long-term growth, but continues to face structural constraints.

These include:

• Limited capacity to generate its own revenue
• High dependence on central transfers
• Rigid expenditure patterns, particularly on salaries and pensions

Despite these challenges, Meghalaya’s fiscal position remains more stable compared to highly stressed states like Manipur.

Structural realities shape fiscal outcomes

The report underscores that fiscal performance in the Northeast is deeply shaped by structural factors rather than policy choices alone.

Difficult terrain and dispersed populations increase the cost of service delivery, while narrow economic bases limit tax mobilisation. As a result, many states remain heavily dependent on Union transfers, in some cases accounting for 60–80% of total revenue.

The way forward

NITI Aayog emphasises that strengthening fiscal health in the region will require improving revenue mobilisation, enhancing expenditure efficiency, and adopting state-specific strategies that reflect local constraints.

“A strong fiscal foundation empowers these states to enhance governance, expand social infrastructure, and effectively leverage central support,” the report notes.