MP first to switch to Jan-Dec fiscal year

PM Modi has also hinted that he favours a January-December financial year

Madhya Pradesh has become the first state to switch to the January-December financial year from the existing April-March cycle, with the state cabinet endorsing the move on Tuesday. 

The move breaks a 150-year tradition as India started adopting the April-March financial year from 1867. 

“The state cabinet in its meeting chaired by Chief Minister Shivraj Singh Chouhan (pictured) today decided to shift the financial year to January-December. So, now the Budget session of the next financial year will be held either in December 2017 or January 2018,” state Public Relations Minister Narottam Mishra told reporters in Bhopal.

The state government, he said, would try to conclude the current financial year by December for a smooth transition to the new system. In the meeting, the chief minister directed all ministries and departments to prepare a quarterly, half-yearly and annual road map of works to be done with fixed deadlines in view of the new financial year cycle, an official statement said.

Madhya Pradesh’s decision comes on the heels of Prime Minister Narendra Modi making a pitch for shifting the financial year to the January-December period during the NITI Aayog’s governing council meet in the national capital on April 23.

The central government had constituted a high-level committee under former Chief Economic Advisor Shanker Acharya to examine “desirability and feasibility” of having a new financial year. The report hasn’t been made public yet.

India has been following the existing financial year cycle since 1867, mainly to align it with that of Britain.

A NITI Aayog concept paper written by its member Bibek Debroy also favoured changing the financial year cycle. Such a change would require amendments to various statues and tax laws during the transition period.

Meanwhile, top officials told Business Standard that the change in the Union government’s financial year from April-March to January- December would happen gradually with the next Union Budget date being advanced by a month. The officials said an ideal situation would be one in which state governments also make the change, so that they are suitably aligned with the Centre’s proposed move.

BJP Rajya Sabha member Vinay Sahasrabuddhe, who also heads the party’s good governance cell that advises the BJP- ruled states, welcomed the decision as deliverance from the colonial hangover on India’s administration. 

“The first jolt to this was by the Atal Bihari Vajpayee government when it shifted the time of budget presentation from 5pm in the evening to 11am,” Sahasrabuddhe said.

Until the year 2000, the General Budget was presented at 5pm on the last working day of February. This was a colonial tradition since 1924, when the Budget speech was first introduced and was made at 5pm to suit GMT. In 2001, Yashwant Sinha became the first finance minister after independence to make the budget speech at 11am.

“Changing the financial calendar to January-December makes more economic sense. This is when the festive season is over. It is also more suited to India’s cropping pattern. Besides, weather forecasts are in by this time, and the administration can prepare for a flood or a drought,” Sahasrabuddhe said.

Pronab Sen, former chief statistician, Government of India, said, “It may not be a very bad idea to advance the financial year, as substantial budget announcements would have been implemented before the monsoon, when practically no construction activity takes place. But there is a downside, that there may be zero forecast available for the monsoon. The database to held the estimation for the economy may be very poor.”