As the government looks to advance the Union Budget presentation by a month to January-end, rating agency ICRA today flagged concerns about availability of lesser data, saying advance GDP estimates as well as corporate tax filings are available only in February.
The government is mulling advancing the presentation of Budget to January-end from current practice of it being unveiled on the last day of February, to help complete the legislative process before the start of next fiscal.
At present, the budget exercise is carried out in two parts with final Parliamentary nod coming sometime in May.
Advancing the Budget would help place money in hands of states and other agencies well before beginning of monsoon and expenditure can be better managed, said ICRA Senior Economist Aditi Nayar.
But she, however, raised bigger issues with such a move.
“The bigger concern is we will have lesser data on the fiscal side. Because advance estimates of GDP comes only in February. And also corporates file their (tax) returns in February. That needs to be balanced before budget is advanced,” she said.
Budget factors in tax revenue, both the likely accrual in the current fiscal and projections for next, in accounting for expenditure for the coming financial year. Also, it makes assumptions of economic growth based on latest estimates available.
Presentation of Budget earlier would help address some of the issues that state governments often raise, she said.
If the Budget is presented at the end of February, it is discussed and by the time vote on account that authorises spendings and finance bill containing tax proposals is passed, it is May, Nayar said.
“The monsoon starts in June and then goes on till September. So, a lot of state governments do tend to say that in terms of their capex activities, the fact that they don’t have a certainty on their inflows earlier in the year becomes a complex task,” she said.
Also, a lot of construction activities cannot happen around the monsoon season and “they feel that they really only have about six months to implement the funds,” she said.
Nayar said that if the financial year is changed then budget has to be presented by November end and most corporates will have to change their reporting format.
The changes should be brought in phases in the way that first budget may be advanced by a month to January end and then at a later date government should contemplate change in financial year.
The government has already set up a committee to suggest the possibility of a change in the financial year. At present, fiscal year runs through April to March.