An unnecessary change?
On Jan. 1, we will be on a weak wicket
Frankly, I don’t think it matters much what you chose as your financial year. The only thing that really matters is whether we have the information that is needed to frame the Budget properly. The critical element in this is the monsoon. And the question is that if we shift the fiscal year to January, do we have a better grip on agriculture than we had on April 1? If we have the financial year starting from April 1 then we need to have Budget on February1. On February 1, it is difficult to have detailed information about the kharif and rabi crops or the prospects of monsoon.
The actual information starts coming in from April. Now ask me the question — what will happen if you shift the budget to January 1: you will have full information on the rabi and less data on the next kharif. This is because rabi will be ongoing then. As far as kharif is concerned, you have none because you have no information about the next monsoon.
Another alternative which used to be considered was moving the financial year to July 1. On July 1, we will have full information on kharif and we will have a fair estimate of what is the soil moisture, groundwater and reservoir estimate. So we are better off on July 1. On April 1 we have some data, but on January 1 we have almost no data on future agriculture, which is both the coming kharif and coming rabi. So as far information is concerned, we will be on a weak wicket in January as far as agriculture is concerned. The revenue from agriculture is not the issue. The issue is we are able to predict with reasonably accuracy what will be the GDP growth. And agriculture continues to be a major component of GDP, it impacts both the demand side and prices. We can’t wish that away. Agriculture itself may be small but its impact on GDP and inflation still continues to be very strong. We can’t ignore that.
As far as infrastructure projects are concerned, let’s keep the calendar in mind. They are again impacted by the monsoon. Normally it takes 2-3 months to start expenditure on projects after the Budget. So with April 1 we are ready to spend around July, when the monsoon is happening. So we can’t spend and we have to wait till September. So we end up losing five months. If we move it to January then we will be able to start spending from April. So we will be able to spend in April and May and then stop for three months. So you end up losing three months instead of five months. But again, if we look at the other alternative, which is July 1, then we can plan beginning from September itself, which means we lose only two months. So on both counts I would say that July 1 is a better date to start the financial year than January 1.