India state fiscal health: Punjab has highest interest burden in FY25

Odisha had the lowest interest burden among states and Union Territories for which comparable data was available in 2024-25 Budget Estimates (BE), at 2.61 per cent, according to Business Standard’s India State Fiscal Health Tracker. It was followed by Arunachal Pradesh at 3.06 per cent, Manipur at 3.97 per cent, Delhi at 4.16 per cent and Mizoram at 4.88 per cent.

At the bottom was Punjab with the highest interest burden, followed by Haryana, Tamil Nadu, Kerala and West Bengal.

The tracker is based on the Reserve Bank of India’s 2025 Handbook of Statistics on Indian States and compares states and UTs across eight separate fiscal indicators.

What does interest burden tell us?

Interest burden shows how much of a state’s revenue is spent on paying interest on its debt.

It matters because money spent on interest cannot be used for other needs, such as public services, infrastructure or development projects.

A higher interest burden means a larger share of the state’s revenue is going towards servicing debt, leaving less room for other spending. A lower ratio means less of the state’s revenue is being used for interest payments. However, this measure alone does not give a complete picture of a state’s financial health.

For instance, if a state receives ₹100 in revenue and spends ₹20 of that on interest payments, its interest burden would be 20 per cent.

How is interest burden calculated?

Interest burden is calculated by dividing a state’s interest payments by its revenue receipts and multiplying the result by 100. In simple terms, it shows what percentage of the state’s revenue goes towards paying interest on its debt.

Formula: Interest payments ÷ Revenue receipts × 100

Using a ratio makes it easier to compare states of different sizes, since larger states naturally have higher interest payments and revenue receipts in absolute rupee terms. For this measure, revenue receipts are used as the denominator.

Which states are in the Top 5?

Odisha occupied the top position with an interest burden of 2.61 per cent, followed by Arunachal Pradesh at 3.06 per cent. Mizoram, ranked fifth, recorded 4.88 per cent. The difference between the first- and fifth-ranked positions was 2.27 percentage points.

Which states are in the Bottom 5?

Punjab had the highest interest burden at 23 per cent, followed by Haryana at 21.56 per cent. Tamil Nadu, Kerala and West Bengal rounded out the bottom five, with ratios of 20.89 per cent, 20.69 per cent and 19.16 per cent, respectively. The gap between the two ends of the ranking is substantial: Odisha’s ratio stood at 2.61 per cent compared with 23 per cent for Punjab — a difference of around 20 percentage points.

How should the ranking be read?

The ranking measures only interest burden and should not be interpreted as an overall ranking of state finances. A state can perform strongly on one fiscal indicator and poorly on another.

The figures are also 2024-25 Budget Estimates rather than final accounts. Budget Estimates represent what governments expected to collect, spend or borrow when their budgets were prepared and can differ from the eventual outcome. The tracker excludes observations where comparable data required for calculating the ratio is unavailable.

Explore Business Standard’s India State Fiscal Health Tracker to see how your state performs across fiscal deficit, revenue deficit, debt, guarantees, interest and pension burden, own revenue and capital outlay, and compare its performance over time.

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