Opinion Calendar Tinkering

Barely a week after Prime Minister Narendra Modi spoke about aligning the fiscal year (FY) with the calendar year in a speech at the Niti Aayog, the Madhya Pradesh government has announced that it will implement the change by presenting its budget for 2018 in December this year. The finance ministry (FM) had mooted a change in the FY in July last year, arguing that the April-March cycle does not allow budget-makers to have a proper assessment of the monsoon. It had described the calendar year as more in sync with the rhythms of rural development and infrastructure-related activities in the country. The proposal had evoked mixed responses with the Niti Aayog supporting it and the industry body, ASSOCHAM, issuing a trenchant critique. In his Niti Aayog speech on April 24, the PM had called for taking the debate to Parliament and the state assemblies. It is disquieting, then, that the MP government has decided to carry out the change even before such a debate has begun.

In July last year, the FM constituted a committee led by the former chief economic adviser, Shankar Acharya, to examine the “desirability and feasibility” of changing the FY. In December, after the committee submitted its report, the ministry denied an imminent change in the FY. It talked of reviewing the Acharya committee report and stated that changing the FY would “require a lot of preparations”. While the report is not in the public domain and neither the Union government nor the MP government have gone public about their preparations, it seems that criticism of the move has gone unheeded. The ASSOCHAM, for instance, had argued, “changing the financial year will not only mean a change in book-keeping, but also in the entire infrastructure of accounting software, taxation systems, human resource practices involving huge costs for both big and small industries.” The shift would “cost hundreds of crores of rupees,” the industry body had said.

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MP’s plan to present its budget for 2018 in December this year, is presumably an

initial-year exercise. Aligning the FY with the calendar year would require the budget to be presented in October or November, about the time when sowing for rabi crops — most importantly, wheat and mustard — begins. It defies logic as to how the finance minister will conduct this exercise with, at best, a sketchy idea of the harvest next year. What is even worse is that the minister will have virtually zero information of the monsoon next year. The MP government’s move is ill-thought out, and other states would be well-advised not to follow suit without a thorough debate.