1. Column: Change the fiscal year

Column: Change the fiscal year

There is a very strong case to get the government’s fiscal year to start around Deepavali

By: | Published: April 30, 2015 2:31 AM

It is not quite the case that every country follows a fiscal year from April 1 to March 31. By fiscal year, I mean one followed in government accounts and budgeting. Individuals and corporate tax-payers may well follow other fiscal years. India’s major crop seasons are kharif and rabi. Kharif crops are contingent on south-west monsoon and are often water-intensive, such crops being harvested in September/October. Rabi crops are harvested between February and April. Which is more important, kharif or rabi? With the exception of rice, primarily a kharif crop, that question cannot be answered. But most people will probably agree that kharif output, contingent on June-September monsoon, is more variable than rabi, which is affected by October-December post-monsoon precipitation. Therefore, if I wish to get a handle on how agriculture has done in a year, I need more of a handle on kharif than on rabi. There was a CSIR Calendar Reform Committee, chaired by Meghnad Saha, and this submitted a report in 1955, after examining 30-plus different calendars that existed in different parts of the country. Post this standardisation attempt, from 1957, the national calendar became the Shaka era, credited to Kanishka. Under this national calendar, for an ordinary year, New Year is on March 22. For a leap year, New Year is on March 23. Year 0 for this calendar was the vernal equinox (when day and night are equal) in 78 CE.

I have no idea what happened to this national calendar. It seems to have sunk without a trace. While cutting through a maze of solar and lunar calendars was desirable, this calendar found no traction, both for New Year celebrations and for government accounts. What is New Year’s Day? Other than January 1, depending on the region, the
answer will be either Phalguna Purnima (February/March), or the first day of shukla paksha in Chaitra (March/April), or April 13/14/15, or the first day of Chaitra (March/April) or the second day of Chaitra. The mode (if that expression is to be used), does coincide with March 22/23. Pinning down a “harvest festival” is a trifle more subjective. Accordingly, to the New Year’s list, you might add December 21/22 (Lohri), Onam (August/September) and Pongal/Makar Sankranti (January 14/15). There is still a clustering in March/April. But suppose I ask you a different question. Which is a pan-Indian festival, one that is observed almost everywhere in India? Forced to make a single choice, you will probably mention Deepavali (October/November). Note that in some parts of India, New Year is celebrated on Deepavali day, or on the day after Deepavali. As is the case today, a traditional year needn’t coincide with the government’s fiscal year.

The choice of April 1 to March 31 as the fiscal year for government expenditure and accounts is a colonial cum historical legacy. We inherited it from the British and its introduction in Britain was also arbitrary, with April 5/6 having become April 1 for convenience. (Note that though the Julian to Gregorian shift changed the New Year in 1752, the tax year continued to be April 5/6.) Some countries have begun to shift fiscal years to calendar years, the argument being that this makes data internationally comparable. However, January 1 to December 31 is just as arbitrary, international practice notwithstanding. We should choose one that best suits our requirements and not necessarily be bound by colonial legacies. In the course of the year, in which month does one know how the economy is going to perform in that year? You will probably say October, which suggests that around Deepavali is a good time to start the fiscal year. There is a catch in this argument. Indirectly, it is based on relative importance of kharif over rabi and importance of agriculture (in employment, if not in sectoral contribution, especially rain-fed agriculture) in GDP. As irrigation spreads or as agriculture’s share declines, this should become less of an issue.

True, but is the importance of south-west monsoon, relative to north-east monsoon, going to decline? This is a climate question, not an agricultural one. In how many states is it possible to work on public construction projects between June and October, when south-west monsoon is at its peak? Very few. A typical year works like this. Union budget—end of February. State budgets—March. Until Finance Bill is passed (say mid-May), little of what used to be called Plan expenditure can take off, certainly not in instances when there is devolution from Union government. (Until Finance Bill is passed, there is a ceiling on permissible expenditure.) Plan funds are released in June. If construction is involved, tenders are floated. However, rains have set in and tenders are probably not floated till September. Those tenders are scrutinised and decisions taken in November. Hence, the bunching of expenditure in February/March. I have caricatured a bit, but this is an acknowledged phenomenon. Since there are rarely any completely new schemes in any budget (Union or state), it is indeed possible to collapse this chain, by resorting to
e-governance, e-budgeting and discussion and approvals of schemes before a formal budget announcement is made. If one does this, the chain effectively begins around November of the preceding year. While this is true, no e-governance and better G2G methods can eliminate constraints of natural climate.

There is a very strong case for moving government’s fiscal year, so that it starts around Deepavali. The mismatch between a Gregorian calendar date and a lunar tithi is hardly a problem. November 1 is as good a date as any. That’s the date when Delhi became a Union Territory. When FMs make budget speeches, moving away from April 1 will get us away from Fools’ Day jokes and wisecracks about April being the cruellest month.

The author is Member, NITI Aayog

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