With Finance Minister Arun Jaitley all set to present the budget for 2017-18 on February 1, 2017, India will again debate if a 150-year-old colonial-era tradition of a financial year that runs from April-March should be discarded and switched to January-December, in line with the country’s monsoons and agricultural harvests.
The central government adopted the April-March financial year in 1867 to align the Indian financial year with the British government, according to this discussion note on changing India’s financial year released by Niti Aayog. Prior to 1867, a May-April financial year was followed. In July 2016, the finance ministry has constituted an expert committee–chaired by Shankar Acharya, former chief economic advisor–to look at the feasibility of changing the financial year, according to a statement by the ministry to the Lok Sabha (lower house of Parliament) on December 16, 2016. The committee will submit its report to the government on December 31, 2016.
The most prominent attempt to change the financial year was made in 1984 by a committee headed by LK Jha, former Governor of the Reserve Bank of India. The most serious recommendations to change the financial year came in the years preceded by deficient rainfall. The Jha committee was formed after droughts in 1979-80 and 1982-83.
Deficit rains in 2014 and 2015 gave further impetus to attempts to change the financial year, the main argument being that the government had, in those years, already made its financial plans and had to redo them when additional money was required to address the effects of deficit monsoons, in a country where over 58% of rural households still depend on agriculture.
India still a rain-dependent economy
Sowing and cultivation in India occurs primarily during the south-west (kharif crops) and north-east (rabi crops) monsoons, with primary watering provided by the south-west monsoons between June and September.
Kharif crops, such as rice and pulses, and rabi crops, such as wheat, determine both food security and exports (India is the world’s largest exporter of rice).