The government is likely to make an announcement to align the fiscal year cycle with the calendar year. In a move to change the financial year cycle of the country, the Finance Ministry had set up a committee under the leadership of former chief economic advisor, Shankar Acharya to examine “desirability and the feasibility of a new financial year”. The step resonates with what PM Modi expressed in one of the ‘Man Ki Baat’ episodes last year. The committee members include former Cabinet Secretary KM Chandrasekhar, former Finance Secretary to Tamil Nadu, PV Rajaraman, and NITI Aayog vice-chairman Rajiv Kumar. “We are exploring… Factors such as the monsoons can also be dealt with more effectively if the financial year starts early,” said a source from ministry.
The practice of financial year from 1 April to 31 March was started by British administrators of India in 1867 to align the Indian fiscal year with that of the British government. The 150-year old colonial practice had to be changed in any case to make it suit the Indian conditions. Unfortunately, governments in the last seven decades have remained ignorant of the issue. The April to March fiscal year cycle does not suit the economic conditions of the country. The management and efficient implementation of many development programmes became unviable due to the age-old practice. “Because of poor time management, many good initiatives and schemes had failed to deliver the anticipated results,” said PM Modi.
The changing of the fiscal year to January to December would enormously boost agriculture in the country and enable the government to take better steps in case of situations like drought. Agriculture constitutes more than 10 percent of the Indian economy and the majority of the rural households depend on it. “In case of a drought, which happens between June and September, a change in the accounting period from January to December will help in better budgeting. If the Union budget is presented in November, then early allocations will help the agro-economy and farmers,” said agriculture economist Ashok Gulati.
The service sector which is the backbone of the Indian economy would also get the benefit of this exercise. Moreover, the Information Technology (IT) sector which is the major exporter for the country till now is required to prepare two accounts, one according to the fiscal year of India and one according to the calendar year which is followed as fiscal year in many countries. Hence, the colonial practice carried out for more than 150 years seems to have only hindered the growth. It had also made the timely allocations of funds difficult for the government. Administration of various government policies will become easy with the change in fiscal year.
Back in 1984, LK Jha committee suggested the aligning of the fiscal year with the calendar year in order to benefit the agricultural sector. But the Congress government decided to go against the recommendations as it required extensive amendments to tax laws, expenditure and financial procedures. The Rajiv Gandhi government was not ready for the troublesome exercise which could have proved to be enormously beneficial for the agrarian population. However, Modi government is keen to do the task in the welfare of farmers and therefore, the fiscal year looks all set to be aligned with the calendar year. By the exercise of changing the fiscal year to January to December, the financial activities of government will align with that of the corporate house giving a huge boost to nation’s growth.
