Abstract
This paper empirically constructs the fiscal performance index for Indian states by using nine separate indicators reflecting different dimensions of fiscal performance of the states. Finance Commissions also use fiscal performance for fund allocations but they use only single indicator based formula which is prone to inefficiency. There is a need for more sophisticated methods for assessing the fiscal performance more carefully. Present paper is an attempt to construct such an index to understand the public finance management of Indian states. My analysis suggests that Chandigarh and Tamilnadu are the best managers and Andhra Pradesh, Gujarat and Haryana have fairly good public finance management. On the other hand, West Bengal, Uttar Pradesh and Punjab are the worst managers.
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