Prime Minister Narendra Modi has established himself as a leader, who wants swift and fundamental change in governance. After coming into power in central government, he has unleashed an era of change. The latest change he is contemplating is about Financial Year of India. Our Financial Year starts in April and end in March the next year. On the other hand calendar year starts from January and ends in December. In most of the countries, their Financial Year is the same as the calendar year. In our country, too, a demand is being made that we should also adopt calendar year as our Financial Year. But, no government in the past has taken up the challenge or even given serious considerations to the demand.
But Narendra Modi is known to accept challenge. Now his government has floated the idea to change the Financial Year to January ? December. Since, India is a federal country, where there are state governments along with union government, hence to proceed towards that goal, state governments should also be taken into confidence. The reason is Union as well as state governments have to change their Financial Year.
India had adopted the current April to March Financial Year in 1867. At that time India was being ruled by the British. Since, British government had April to March Financial Year, India had to follow it. After Independence, India had the choice either to continue with the old financial calendar or change it. Our government, after independence, decided to go with the tradition and we continued with the old one. We did not even change the timing of the presentation of the budget. Later on we changed the timing to present the budget in Parliament, but the Financial Year and many other traditions remained the same.
Modi government had changed the practice to present a separate Rail Budget. Not only it, it has also changed the date on which budget is presented. Earlier, it was presented on the last day of February, but now we have started to present it on first day of February. Earlier, the Budget used to be passed in the next financial year and for the first three or four months, Parliament used to pass a Vote on Account to incur the government expenditure before the passage of the budget.
This year, Budget was passed before March 31st, and hence there was no need of a Vote on Account. With this change, now government has got full one year to carry out the works proposed in the budget. Earlier, the works started after the passage of the budget and with the closing of the Financial Year on 31st March, the work was closed.
One another major change in the budget of the current year was the end of categorizing the expenditure into Plan and non- Plan expenditure. Since Planning Commission has been abolished and with the planning process has also come to an end, hence there was no need for categorizing the expenditure in term of Plan and non Plan.
After making so many changes in financial management of the government and the country, now Prime Minister wants to change the Financial Year itself. The idea behind it is to go with the world and international institutions. In addition to it, by changing the fiscal year, better financial management of the country is possible. It is compatible with our agricultural cycle, which is dependent on Monsoon. By the end of the calendar year, we are well informed about the agricultural produce of the country during the full one year. Both Kharif as well as Rabi crops are harvested between January and October, hence by November, we are well informed about the agricultural productions, hence we can make better fiscal decisions in the budget.
Changing Financial Year is a good idea, but it is challenging task. First of all, a political consensus has to be made to implement it, because all States and Union have to be implementing it. Till now, the changes made by Modi government pertained to Central subjects only, so it did not pose any political hindrance, but this change would need to get the consent of all parties ruling the states.
-Contributed by Kriti
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