It will benefit infrastructure projects
It will align the Indian financial system with the global financial system where the January to December cycle is being followed. We must remember that the AprilMarch financial year was being followed because for a very long time we were an agrarian society. We were highly dependent on agricultural revenue. So in that scenario, the government could only make an assessment of taxes and revenue when the rabi crops (the crop which are sown in winter and harvested during spring) had come in. This was typically in February or March, during which time the government used to get an idea about the revenue. So April became the month from which the new financial year could start. However, over a period of time, our dependence on agriculture reduced, and the government’s revenue from agricultural taxes became miniscule. So logically, having the fiscal year start from January will be a good idea.
As per current tradition, even if the budgeting is done in February and the accounting year starts from April, the actual release of funds happens only from June or July. And then the monsoon strikes the country. Most of the construction work slows down during this period.
But if the fiscal year starts from January, as is being proposed by the Centre, it will mean that the Budget will be passed by the end of December. In such a scenario, the government will be able to release funds starting from January.
This will give the country a good six months of working season before the monsoon hits the country. There will be a much better implementation of the infrastructure projects in the country if the fiscal year starts from January.
So, it is a good decision to start the fiscal year from January from the infrastructure point of view.
It will benefit infrastructure projects in the country. Of course, the changeover will be complex, it will take lot of coordination and lots of accounting will have to be done.
There will be an overlap for a year or so. However, I don’t agree with the argument of the associations that the changeover will be costly for corporates. What type of changes will they have to do? Everything will become JanuaryDecember. One year could be difficult because of the transition. In that year, accounting will have to be done twice. But once the cycle starts going, it won’t be a problem. And the problem will not be for long.
Of course, changing the fiscal year to JanuaryDecember will not make any difference in taxation for the government as many countries start their accounting year even in July. However, infrastructure projects will be benefitted.