The paper is an attempt to assess the fiscal performance of eight north eastern states of India over a period of sixteen years (2000 – 2016). The paper constructs a composite index to measure the level of fiscal performance across the states based on their indices where each index is constructed based upon three fiscal related variables. Based on the composite fiscal performance index the study observes that the fiscal performance of most of the NE states is inconsistent and deteriorating over the years due to increasing deficit burden, poor own revenue capacity and high expenditure-debt serving ratio. The peculiar situation in the North Eastern states and the inherent restrictions implies that these states are faced with hurdles in the implementation of policies. NE states are favored states, getting large tax preferences, exempted from paying direct taxes; enjoy a number of subsidies, have rigid/undefined property rights regime, which hinders the identification of the potential of the economy. We believe that it is not protectionist policies rather it is the failure to harmonize protectionism with policies geared towards efficient resources management policies that undermines the fiscal health of the states, resulting in depressed developmental outcomes. Therefore, the institutional arrangement which vitiates fiscal health of the North Eastern states and adversely affects economic development is the outcome of the incongruity between protectionism and policies aimed at resources utilization. JEl Classification: H21, H62, H68, H83, P35