Among the many things Prime Minister Narendra Modi is likely to talk about in his fourth Independence Day speech this month is a proposal to change a 150-year-old practice that goes behind fixing India’s Budget and much of your financial planning.
He may push for a January-to-December fiscal year instead of the current financial year — from April to March — that was adopted in 1867, principally to align the Indian financial year with that of the British government.
While it may look like a seemingly straightforward step at keeping up with a global benchmark, there’s more to it than meets the eye. Here’s how:
1) If the calendar year comes into place, the budget dates will need a fix too. The Centre then gets to squeeze in a budget in November 2018, six months before the general elections in May 2019. In November, the government may come up with all the populist measures with a hope of impressing the voters. It also gives the Centre ample time to adjust to new realities like GST, domestic and global uncertainties.
2) Most governments have the grouse that the financial year timing does not allow them to account for the impact of monsoon rains. Agriculture contributes more than 15% to India’s GDP and above 58% rural households depend on farm yields. Assuming there is drought, which is the norm between June and September, a change in the accounting period will help in better farm allocation.
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