Context:
The 2025 State Performance Ranking Report by Care Edge Ratings (a Care Ratings subsidiary) has received wide media attention. Although prepared by a private entity, it gained semi-official stature through a foreword by the CEO of NITI Aayog.
- The report evaluates states based on seven pillars: economic, fiscal, financial, infrastructure, social, governance, and environment.
Methodology
- Utilizes 50 indicators, weighted and normalized based on expert judgment.
- States are grouped into:
- Group A: Large states
- Group B: Northeastern, hilly, and smaller states
- Each pillar has a designated weight:
- Economic (25%), Fiscal (20%), Financial & Infrastructure (15% each), Social & Governance (10% each), Environment (5%)
2025 Rankings
- Top Performers:
- Group A: Maharashtra, Gujarat, Karnataka
- Group B: Goa, Sikkim, Himachal Pradesh
- Lowest Performers:
- Group A: Madhya Pradesh, Jharkhand, Bihar
- Group B: Arunachal Pradesh, Manipur, Nagaland
Limitations of Utility
- Unlike credit ratings, these rankings do not affect borrowing costs since state bonds are sovereign-backed.
- While intended to promote competitive federalism, there’s no binding incentive or accountability mechanism to encourage actual policy reforms by state governments.
Policy Recommendations
- Redesign indicators to reflect real outcomes (e.g., actual service quality in education/health).
- Incorporate institutional strength and governance quality into the framework.
- Ensure transparency in assigning weights and consider broader stakeholder consultations.
