The government on Wednesday set up a committee to examine the option of moving to a new financial year cycle, replacing the existing April-March period.
The committee, headed by former chief economic adviser Shankar Acharya, will study the “desirability and feasibility” of moving to a new financial year cycle, the finance ministry said in a notification.
Different countries follow different financial years. For the US government, it runs from October 1 to September 30, and in Australia from July 1 to June 30. China follows a January 1-December 31 financial year.
Countries like Canada, the United Kingdom, New Zealand, Hong Kong and Japan follow an April 1-March 31 financial year like India.
A new cycle will force changes in a string of activities, including finalisation of accounts, filing of returns and the government budget, which is usually presented in February, a month before the financial year ends.
The committee, which will submit its report by December, will examine the merits and demerits of different financial year cycles, including the existing one (April-March), the ministry said.
This is not the first time India has looked at changing its financial year cycle. In 1984, the LK Jha committee had recommended moving to a January-December format.
One main argument in favour of moving away from the existing cycle is that the June-September monsoon — often called the Indian economy’s lifeblood — sets in barely two months into the financial year, making policy making difficult.
Besides Acharya, the members of the committee are former Cabinet secretary KM Chandrasekhar, former Tamil Nadu finance secretary PV Rajaraman and Centre for Policy Research senior fellow Rajiv Kumar.
The panel will have to provide reasoning for the suitability of a financial year from the point of view of correct estimation of receipts and expenditure of the central and state governments.
It also has to state its effect on the different agricultural crop periods and the relationship of the financial year to the working season.
Besides, it will have to analyse its impact on businesses, taxation systems and procedures, statistics and data collection and the convenience of the legislatures for transacting budget work.
It will also be required to work out modalities for amendments that may be required in various statutes, laws and rules.