MOSL: ECOKNOWLEDGE-Will India have two budgets in 2018? Probable change in financial year more a tweak than a reform

​ECOKNOWLEDGE: Will India have two budgets in 2018? Probable change in financial year more a tweak than a reform

A change in financial year from April-March to January-December has been discussed within the government, and we believe it could happen as soon as next year. If so, India would have two budgets in 2018 – on February 1, 2018 (for truncated FY19; ending December 2018) and another on November 1, 2018 for the full year ending December 2019.

A NITI Aayog study indicates that an April-March financial year seriously limits the government’s ability to account for uncertain monsoons. Further, it leads to a suboptimal utilization of the working season. While the advancement of the Union Budget by a month has already resolved the latter issue, it is argued that commencing the financial year from January is the best alternative to address the former issue.

A change in financial year has been argued unsuccessfully since the 1870s. Its effectiveness today is debatable, however, given the reduced importance of the agricultural sector. Moreover, the need for structural reforms in agriculture, or otherwise, is independent of the financial year. While the government might be convinced of the merits of changing the financial year, if it happens, we believe it would be more of a tweak than a structural reform.