New Delhi: Madhya Pradesh on Tuesday became the first Indian state to move to a January-December financial year, setting the stage for a similar (though not immediate) shift by the central government.
Prime Minister Narendra Modi suggested at the NITI Aayog’s governing council meeting last month that states should take the lead in changing the financial year to January-December.
Such a shift will help in better economic and political management of the country and also help the Indian economy integrate with the global economic architecture.
Last year, a committee headed by former chief economic adviser Shankar Acharya recommended changing the fiscal year to January-December. Since then, there have been reports that the government is seriously considering this. The government’s act of moving forward the Union Budget’s presentation, from the last day of February to 1 February was seen as a precursor to this.
If the financial year is to start on 1 January, the Union Budget ideally needs to be presented in late November.
Currently, India follows a April-March financial year (a legacy of the British Raj) and all macroeconomic data, including the government’s budget, are compiled and prepared for the same period. Most Indian companies also do the same. Most other countries follow a January-December financial year.
S.K. Mishra, secretary to Madhya Pradesh chief minister Shivraj Singh Chouhan, confirmed that the state has decided to change its financial year. “It’s one of the major reforms that the government is planning to initiate keeping in mind global practices," he added over the phone.
It makes sense for the entire country to do this, said D.K. Joshi, chief economist at credit rating firm Crisil Ltd.
“The Union government will have to take the lead and everyone (states) will have to shift together. It will have to be uniformly applied across the country. It is already difficult to sync with the global accounts which have a calendar year."
In 2001, the National Democratic Alliance government, under prime minister Atal Bihari Vajpayee, changed the time of presenting the budget to 11am, from the British era practice of presenting it at 5pm.
On Tuesday, the Business Standard newspaper reported that the “Union government is taking preparatory steps to switch over to a new financial year cycle that will start from January and end in December".
“To begin with, the next Union budget presentation date is likely to be advanced by about a month, to prepare the ground for a change in the financial year," it added.