Debt-to-GDP: India is currently reported to have the highest growth rate among large economies in the world in 2025–26. Recently, according to the NITI Aayog CEO B.V.R. Subrahmanyam, India overtook Japan to become the fourth-biggest global economy and is expected to pass Germany within the next 2.5 to 3 years.
Though the Indian economy is performing well, the IMF and Fiscal Monitor study revealed that the debt of the nation stands at 80.4% globally.
The government of India recently decided to make the debt-GDP ratio its key fiscal goal from financial year 2026-27 onwards, with hopes of achieving a figure below 50±1 per cent by March 31, 2031.
According to the report, Jammu and Kashmir is at the top with a 51% debt-to-GDP ratio. After that is Arunachal Pradesh, with a low state economy and a tremendous fiscal deficit at 8.9%.
Nagaland, Mizoram, Sikkim and Meghalaya from the northeastern region of India are included in the list mainly because of structural issues due to internal poverty, lack of industrial growth, rough landscape and small populations.
Alternatively, Odisha’s low debt-to-GDP ratio (12.7%) highlights how well it manages its budget, collects revenue and ensures spending is appropriate.
The states of Maharashtra (18.4%), Gujarat (15.3%), Karnataka (24.9%) and Tamil Nadu (26.1%) have grown their economies significantly, but they have kept their debt levels under control.
Top 10 Indian States by Debt-to-GDP Ratio (FY 2025-26)
| Rank | State | Debt-to-GDP (%) | Fiscal Deficit (%) |
| 1 | Jammu & Kashmir | 51 | 5.6 |
| 2 | Nagaland | 47.8 | 3 |
| 3 | Arunachal Pradesh | 45.9 | 8.9 |
| 4 | Punjab | 44.5 | 3.8 |
| 5 | Himachal Pradesh | 40.5 | 4 |
| 6 | Mizoram | 38.8 | 4.6 |
| 7 | Sikkim | 38.2 | 5.8 |
| 8 | West Bengal | 38 | 3.6 |
| 9 | Meghalaya | 37.6 | 3 |
| 10 | Bihar | 37 | 3 |
Source: GDP and debt-to-GDP figures are based on 2025–26 budget estimates, sourced from PRS Legislative Research and compiled by Forbes India.
Note: The debt-to-GDP ratio plays a major role in helping assess both the debt management and the overall economy of a country or state. Large government debt load can lead to long-term concerns, less investment in development and distrust about the country’s ability to repay its debt.
Methodology: The debt-to-GDP ratio of Indian states is derived by dividing the total outstanding debt of a state by its GDP and multiplying by 100 to get a percentage. Here is the formula: The debt-to-GDP ratio for states is calculated as (total state debt/state GDP) * 100.
What the Fiscal Health Index is meant to achieve
In order to compare how financial the Indian states are using similar indicators.
To see which states perform well with fiscal management and where there are problems.
To make the financial decisions of the government more open, responsible and financially smart by studying the facts.
To support the needs of policy experts in taking steps to improve public financial strength.
Important Data Monitored
To measure fiscal health, the Fiscal Health Index 2025 uses a set of grouped indicators in these five main areas:
Tax Buoyancy
Tax buoyancy is the proportion of change in state tax revenue compared to the change in its gross state domestic product (GSDP). It is the ability of the taxation policy to keep pace with development in the economy.
Gathering information on states’ own revenues, how responsive taxes are to economic changes and ways other revenue is raised.
Debt-to-GSDP
The debt-to-GDP ratio explains if the state’s total public debt is bigger or smaller than its gross state domestic product (GSDP), showing how easily the state can handle its debts as a percentage.
Assessing how effectively resources are used, prioritizing spending when necessary and ensuring still following budget rules.
Examination of states’ level of debt compared to their GSDP, how much their debt costs in interest and the long-term sustainability of the debt.
The states’ fiscal deficit is measured as a ratio to their Gross State Domestic Product (GSDP) and they make sure to follow the set legal limits.
A comprehensive view of revenue, expenditure, deficit and debt is used to see if the country can keep its finances healthy for the coming years.
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