Madhya Pradesh has taken a major step in changing the way finances are managed in India. In a move to align more with the calendar year, the BJP-led government in the state has become the first in the country to adopt the January to December financial year.
The state’s decision comes even as the centre mulls a similar proposal. First mooted by Prime Minister Narendra Modi, the major advantage to such a change is considered to be to the advantage of the country’s agriculture sector. The next budget in Madhya Pradesh, will be presented in December 2017.
Addressing a recent NITI Aayog Governing Council meeting, Modi had said, “In a country where agricultural income is exceedingly important, budgets should be prepared immediately after the receipt of agricultural incomes for the year. There have been suggestions to have the financial year from January to December.” He also urged states to take the initiative in this regard
The Shivraj Singh Chouhan government’s decision makes it the first to create a dent in Feb-March financial year that was adopted as a result of the colonial experience in 1867. Adopting the January to December frame for the financial year of the country will involve incorporating a host of serious changes.
This includes the reorganisation of the tax year and the tax infrastructure, streamlining all the major industries to the new time format to conduct their businesses and adjusting the GST to suit any change in the time period of the financial year.
This would require intensive and elaborate reforms in the existing revenue infrastructure. However, the shift would come with a slew of benefits as well. Adopting a January to December financial year would put India in line with all the major economies of the world, thereby presenting a positive step towards global integration. This would largely benefit the MNCs investing in India that have to deal with multiple economies.
Further, the change would align the budget presentation with the crucial monsoon cycle and also with the country’s crop harvests of Rabi and Kharif crops. The current system does not allow for the government to take into account monsoon predictions before allocating the budget for a year. A committee headed by the former chief economic adviser, Shankar Acharya, backed the shift to the January-March financial year in its report submitted to the Ministry of Finance in December last year.