Modi is pushing for changing a 150-year-old fiscal practice

Prime Minister Narendra Modi is expressing his support for a plan that could change a 150-year-old fiscal practice in India, of having a January-to-December fiscal year instead of the usual April to March.

The practice of having an April to March fiscal was adopted in 1867, so that India’s financial year could be aligned with that of the British government.

Here are the possible impacts that this change would bring:

Better cover for farmers

The present financial year timing doesn’t allow India to account for the impact of monsoon rains. If in case the change is introduced, a better farm allocation in case of droughts, which usually happen between June and September, would be possible.

Alignment with the rest of the world

A total of 156 nations follow the calendar year as financial year, along with top firms and agencies like World Bank and IMF. This change would help India integrate with the world economy and regarding the agencies, it would be easier in terms of data interpretation. Firms from foreign countries with calendar year as financial year won’t have to be worried about doing business in India in fear of possible clashes.

Optimum utilisation of resources

The current fiscal year is said to be hindering proper utilisation of the working seasons, not keeping in mind the national culture and habits. This impacts data collection for national accounts.

The positive impacts aside, it would be a tough task to implement, given that it would require a change in the budget date, tax assessment year, tax infrastructure and possibly the Parliament session timings. Given that we are already geared up for GST in July, this would be too much of a change to adapt to.