Opinion By the cruellest month

Why did we desire to switch? Two reasons were mentioned. First,there is a bunching of pointless public expenditure towards end of March,before stroke of the midnight hour on March 31. That’s known,and malaise in government budgetary and accounting procedures is also accepted. Reforms are necessary. But a mere change in the fiscal year doesn’t eliminate this syndrome. We move the malaise from end-March to end-December.

Second,we want the switch because we wish to conform to international practice. International practice on what? Indeed,most countries report data on calendar year basis and India is a bit of an outlier there. However,that doesn’t mean public finance follows a calendar year. On the contrary,few major countries in the world (China is an exception) follow calendar year for public finance purposes. Therefore,international best practice cannot be an argument. A better argument is that April 1 is completely arbitrary and we ought to improve. April 1 is arbitrary in two ways. It’s arbitrary in the way it was introduced in England and it’s also arbitrary in the way the English introduced it in India. The vernal equinox is a natural point to begin a calendar and many countries,England and India included,began their calendars around March 20/21. Calendar reform is a messy affair. Until 1752,England’s legal year used to begin on March 25. Though implemented in 1752,the statute was from 1750,titled,“The Calendar (New Style) Act”,and involved transition from a Julian to a Gregorian Calendar.

That transition was about aligning the number of days in a year. The language is understandably quaint,but deserves a quote. “Whereas the legal supputation of the year of our Lord in England,according to which the year beginneth on the twenty-fifth day of March,hath been found by experience to be attended with divers inconveniences,not only as it differs from the usage of neighbouring nations,but also from the legal method of computation in Scotland,and from the common usage throughout the whole kingdom,and thereby frequent mistakes are occasioned in the dates of deeds and other writings,and disputes arise therefrom.” The year was supposed to change to January 1,but didn’t for tax purposes. In transition from Julian to Gregorian,the calendar advanced by 11 days and the tax year became April 6 instead of March 25. (There are several theories about why this occurred.) For some purposes,the fiscal year in the UK continues to be April 6. However,for public finance,it became April 1,primarily because April 6 was awkward. In that sense,April 1 was arbitrary in England. There are several explanations for April Fools’ Day too,and some of these are connected to people who failed to switch to January 1.

A Calendar Reform Committee was formed in India too,in 1952,to reconcile several calendars that were around. The report was published in 1955 and recommendations implemented in 1957. Consequently,Saka Era begins on the date of the vernal equinox. That’s in synch with most New Year practices in India. It was natural for the East India Company to align this with April 1. While vernal equinox wasn’t arbitrary,introduction of April 1 by the English was arbitrary. There is no reason to hang on to colonial practices if we can do better. For instae,we have changed the time when Union Budget is presented. We might even change the day. So why hang on to the fiscal year?

Two considerations are important. First,there is the agricultural crop year,divided into rabi and kharif,and notwithstanding agriculture’s declining importance,it continues to be significant. April 1 is linked to rabi rather than kharif,though even there,a better sense of rabi harvests requires us to move to something like June 1. On the other hand,if we are more interested in kharif,we should move to something like October 1. Second,there is a festival calendar too,important for corporates to assess sales and taxes,though this is not a problem if corporate fiscal years are delinked from government fiscal years. While India is a land of perpetual festivals,the peak is between October and January.

Allowing for time-lags,this doesn’t fit badly with the present fiscal year cycle. Therefore,there seems to be a case for delinking the corporate fiscal year from government’s fiscal year. If that is done,there is a case for moving the public finance fiscal year to something like October 1. Incidentally,that’s what the US also has. If budgets become more and more transparent as tax reforms take hold,taxes won’t change from year to year and we will no longer require long budget sessions of Parliament. Effectively,budget proposals can be placed in the public domain in advance. Until that happens,there is the matter of squeezing in a budget session. That’s more doable around October 1 than around June 1.

However,it is by no means obvious that there is a case for switching public finance to the calendar year. Even if the fiscal year is different from the calendar year,there is no great problem in providing calendar year data to international organisations. We do have a problem with our statistical system,but that doesn’t have much to do with what our fiscal year is. In any event,why is there this reticence on the finance ministry’s part? Let’s have that note in the public domain and let’s debate the issue. Let’s not be arbitrary once again.

The writer is a Delhi-based economist express@expressindia.com,/i>