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Some 150 years after the British set India’s financial year from April 1 to March 31, the government is now looking to re-set the fiscal time-cycle.
The Finance Ministry has set up a committee under Shankar Acharya, a former Chief Economic Adviser to the Finance Ministry, to examine the “desirability and the feasibility of a new financial year”. The committee is expected to submit its report by December 31.
The members of the Shankar Acharya panel include former Cabinet Secretary KM Chandrasekhar, former Finance Secretary to Tamil Nadu PV Rajaraman, and Senior Fellow at the Centre for Policy Research Rajiv Kumar.
India follows the April 1-March 31 fiscal cycle, but many countries and multinational companies follow the calendar year (January 1-December 31).
Alternatively, the financial year can also coincide with the start of the cropping/harvest season.
“We are exploring… Factors such as the monsoons can also be dealt with more effectively if the financial year starts early,” said a source in the Ministry.
Officials said that such a move could help in more effective implementation of policies and Budget announcements.
The Acharya Committee will take into account factors such as the correct estimation of receipts and expenditure of the Centre and States, the effect of the different crop periods, the relationship between the financial year and the working season, the impact on businesses, statistics and taxation, and the timeline for Budget-making by the legislature.
“In case a change in financial year is recommended, the Committee has also been asked to work on the modalities of effecting the change,” the Ministry said.
In 1867, the British had set India’s financial year from April to March, to align it with its own fiscal cycle.
In 1984, the LK Jha Committee had recommended that the financial year should start from January mainly considering the impact of the South-West monsoon on the economy. But this remained a non-starter.
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