Fincial year

The April 1 to March 31 fincial year followed in India is a relic of colonial times. A full 150 years ago, in the year 1867, the imperial administration here introduced it to align its fincial year with that of the mother country. The English fincial year origilly started on March 25, one of the four quarter days in the calendar when rents were due. After switchover from Julian to Gregorian calendar, the date shifted to April 1 for the British government to mark the beginning of the year’s fincial statements. For persol tax purposes though, the fincial year in Britain still starts on April 6 and ends on April 5 of the next calendar year. So should sovereign India keep on nursing this colonial holdover, aspiring as she does to be one of the poles in a multi-polar world this century? Prime Minister rendra Modi is pitching for the country to begin its fincial year in conjunction with the calendar year, from January 1 to December 31. At the Niti Aayog Governing Council’s meet, he asked chief ministers to consider this proposal. According to the Prime Minister, the country has failed to capitalize on many good initiatives and schemes primarily due to poor time magement. When income from agriculture is so crucial for India, the accounting period should be changed to allow for the impact of monsoons, so goes his logic. After all, the time from June to September is when flood or drought wreak their damage on the farm economy. Agricultural incomes could vary due to droughts, floods, pest attacks and other factors, so budgets should be drawn up when it is possible to make suitable fund allocations and other interventions. Some economists are disagreeing with the PM’s push, contending that agriculture contributes merely 17 percent or so to the country’s GDP. So, any wrenching change by bringing forward the fincial year on the plea of benefiting our farmers will not be feasible, they argue. But the fact is that nearly 60 percent of rural households still depend on their farm yields. Considering the widespread farm distress that continues to haunt large parts of the country, the Modi government cannot afford to overlook this aspect, particularly after the political price paid by the earlier Vajpayee-led NDA regime.  

However, economists opposing the PM’s proposal are on a stronger wicket with the argument that this is the year in which the Goods and Services Tax (GST) will be rolled out across the country. It will be surely too much to expect enterprises to bear the double whammy of adapting to a new yearly accounting period when they will still be working out how much they stand to lose or gain in the big bang GST tax reform. In the beginning of a year in which the demonetisation effect was in full play, more far-reaching changes, however well-meaning, will only be looked at with trepidation. Besides, quite a few states are already struggling to cope with changes like GST rollout and budget merger of plan and non-plan expenses. Prime Minister Modi, however, is a man in a hurry. In less than three years, he has replaced the fund allocating Planning Commission with a federal think tank that is NITI-Aayog, subsumed the Railway budget into the Union budget while bringing it forward to February 1, and effected a high denomition currency flushout. He is now calling upon state governments and other key organisations to fix goals for 2022, the 75th anniversary of the country’s Independence.  Surely, India as a country needs to chart its own trajectory keeping in mind its strengths and limitations. To be fair, bringing forward the fiscal is not a new idea confronting this country. The LK Jha committee made this recommendation way back in 1984, but the then Central government developed cold feet. The suggestion was revived by the NITI Aayog panel in July last year, and if state governments can get their acts together, it may well be a reality in 2-3 years time. As a practice, the January 1 to December 31 fincial year has many things going for it, like proper use of sowing seasons and ratiolisation of time, resources and data collection. European Union countries and Chi are among the 156-odd tions that have adopted this fincial year. tions like the USA, Australia, apart from Pakistan and Bangladesh in our neighbourhood, follow other fincial years, but it makes eminent sense to align ourselves with the larger group.