Krishna Karwa Moneycontrol Research
A Parliamentary Panel's suggestion in March 2017 proposed the adoption of January-December as the new financial year, thereby signaling an end to the April-March period followed in the country since 1867. It comes with its costs, but is a good idea. Here’s why:
First, the move aims at aligning India’s financial accounting and fiscal strategy policies with a vast majority of its global peers. The standardization could ensure uniformity in collection and analysis of statistical data, in accordance with international practices.
Second, from an agricultural perspective, the revised fiscal will smoothly align itself with the country’s monsoon cycle and agricultural harvests for Rabi and Kharif seasons. In case of a drought, which generally happens between June and September, an alteration in the accounting period is likely to facilitate better decision-making as far as allocation of funds towards agricultural growth is concerned. Though this may necessitate bringing forward the Union Budget presentation to November every year, the benefit of timely fund allocations to the agrarian players/farmers will be pivotal in improving the overall productivity of the sector.
Third, for MNC firms in India, which currently deal with two types of financial years (one in India and the other as per the parent company’s home laws), a consistent reporting structure could ease their account management processes. Foreign subsidiaries of Indian companies would benefit in the same manner, too.
Though short-term disruptions in connection with budget formulations, statistical data restatement, compliance infrastructure, bookkeeping changes, and parliamentary session schedules, among others, may cause some degree of inconvenience and lead to significant one-time readjustment costs, the long-term transformative advantages outweigh these quite comfortably.
With GST kicking off in July this year, bringing along its own challenges, it may be a tough job to get the fiscal year transition done soon. Additionally, various states have expressed their concerns relating to administrative difficulties involved during the course of execution of the ambitious plan, underscoring their lack of adequate preparedness and/or willingness on this front.
However, recent reports suggest that the government is considering presenting next year’s Union Budget in January instead of February, as part of its preparatory steps in this direction. This may be an indicator of the switchover commencing from January 2019. With Madhya Pradesh agreeing to the change, the question is, how quickly will the other states fall in line?
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