January-December fiscal year: panel set up to look at feasibility

New Delhi: The finance ministry on Wednesday set up a committee under former chief economic adviser Shankar Acharya to examine the desirability and feasibility of having a new fiscal year.

Currently, India follows the April-March fiscal year and all macroeconomic and company data, including the government’s budget, are compiled and prepared for the same period.

Most countries follow a January-December fiscal year.

A committee of secretaries headed by the cabinet secretary had earlier this year recommended changing the fiscal year to January-December.

The other members of the latest committee are former cabinet secretary K.M. Chandrasekhar, former Kerala finance secretary P.V. Rajaraman and senior fellow at the Centre for Policy Research Rajiv Kumar. The committee has been asked to submit its report by 31 December.

The Union finance ministry, in a statement, said the committee will examine the merits and demerits of various dates for the start of the fiscal year, including the existing dates.

The committee will also examine the suitability of the fiscal year from the point of view of correct estimation of receipts and expenditure of central and state governments; effect on agricultural crop periods; impact on businesses, taxation systems and procedures, statistics and data collection; the convenience of legislatures for transacting budget work; and other relevant matters.

The committee will also interact with other experts, institutions, government departments as necessary. N.R. Bhanumurthy, professor at the National Institute of Public Finance and Policy, said except for agriculture, a change in dates for the fiscal year will not alter information flow for other factors cited by the finance ministry.

“While a July-June financial year in sync with the agriculture calendar will take care of the seasonality in agriculture, it will not be comparable with the rest of the world. A better option will be to switch to a January-December financial year, which will make it comparable with other countries,” he added.

After India switched to gross domestic product (GDP) at market prices from GDP at factor cost to calculate its national income, it made its macroeconomic data internationally comparable. However, multilateral institutions still have to make separate calculations for India’s fiscal year as it is among the few countries not following a January-December fiscal year.