Thursday, July 21, 2016

Why India should change its fiscal year

When I was in school, I heard that India’s fiscal year start’s on 1 April because India is a agrarian economy and the harvesting season happens in April. But now I think it could be 1 April because UK has it’s fiscal year on 1 April, and after Independence, we might have preferred to simply keep it that way.

But I think we should change the fiscal year to either 1 January or 1 October. Or we could keep start our fiscal year on Diwali, the way Stock market begins it’s new year.

But why should we change it? Because majority of development work at center, state and municipality level happens between January to March, the last quarter. That is when everyone wakes up and decides that it’s time work needs to be done. This is how the fiscal planning and execution goes  at all 3 levels  –

By February or March, a budget is allocated by the elected representatives.
The new budget is enforced from 1 April. First quarter starts. But not much work is initiated in the first quarter because  June to September is a rainy season in India. And rainfalls interrupt all infrastructure work. So 4 months, no work. 2nd quarter just goes by waiting for rains to end. As soon as rainy season  ends, the festival season starts in India. It starts with Navratri, Dusshera and ends with Diwali. Everyone is in a festive mood so labor goes back to their villages to spend time with family. Bureaucrats don’t want to spend much time at office.  By November/December, everyone is back at work and then decide what needs to be done. Third quarter also goes by. The development work starts in January, 4th Quarter.

Also, many government agencies don’t use the funds allocated to them till November. They start using the funds in January, 4th quarter, because unless they can show they have used their old funds, they can’t apply for more funds in next fiscal year. So they initiate lot of projects in January, which might or might not finish by May. If they don’t finish by June, there is a 4 month break after which work resumes in November.

So basically the execution work happens in 4th quarter. Just like students wait till January to study properly for their final exams in April.

So what if the fiscal year starts on 1 January, lets evaluate:
  1. The budget will need to be presented in the assembly by November, which means everyone in the government is busy from October. Bad timing for festival season.
  2. Budget is enforced on 1 January. Government has 2 quarters to finish the work. They have 6 months to use the funds.
  3. Majority of the nations have fiscal year on 1 January.
What if fiscal year starts on 1 October:
  1. Budget to be presented by September. Government is busy preparing the budget in August September.
  2. By September we already know the rainfall which has a major impact on stock markets and budgeting, since India is a agrarian economy. This might be positive for budget planning
  3. Budget is enforced on 1 October, which coincides almost with Diwali.
  4. Our financial year will start with US fiscal year.
  5. Departments have 9 months (from October to May) or the first 3 quarters to use the funds without any interruption from rains.
  6. When development work stops in June, we can take stock of the situation and start planning from June to September, in 4th quarter.
What if fiscal year starts on 1 July:
  1. Budget to be presented by June.
  2. Budget enforced on 1 July.
  3. Many countries including Australia have their financial year starting on 1 July.
  4. Departments cannot start infrastructure work in July, but they can start making purchases in the first quarter. We would still have 9 months or 3 quarters to finish the work.
I am saying this purely from the point of view to implement infrastructure and development works. I am sure corporate sector will also benefit in this age of globalization and aligning their fiscal year with their counterparts in other countries.  This might not work well for agriculture.

Other option could be that states should be allowed to choose their own fiscal year. But I think that is highly impossible.

Book Review of Being Hindu

Being Hindu is a book written by Hindol Sengupta. The author has put forward his ideas properly with a solid research. He also expresses his personal life honestly which engages the reader from time to time.

On a personal note, I agree to most or all of the views expressed by the author in the book. In fact, I had similar observations that Hindol has mentioned in one of his chapters. Example: I never understood why there would ever be a conflict between Hinduism and Science. I know that the Church did not like Galileo for his views but I don’t think that our temples would ever deny the statements made by the scientist.

I also don’t think Hindu’s  view of creation would ever conflict with the Big bang theory or evolution. In fact the 10 avatars of Vishnu are in line with the evolution of the world (fish, tortoise, boar, lion-human, human).

It could be more than coincidence that earth was formed 4.6 billion years ago and a day of Brahma is 4.32 billion years.

As Hindol mentioned in the book, Hinduism would in fact welcome new scientific discoveries as these will strengthen what was written in Hindu scriptures ages ago.
I have read Vamsee Juluri’s Rearming Hinduism and Being Hindu reminds a lot about that book. Its good to see lot of content by authors young and old on the rich history of Hinduism. Would definitely recommend Being Hindu for a light reading on the topic.
I am have observed that many books published recently look more like a collection of articles or blogs written by the author. This book also reminds me of that. I think that’s how the reader  prefers reading a book these days because we are used to reading short essays or blogs online. I still have nothing to complaint about this format. But I prefer the start and end to be connected and a flow from one chapter to another. My next book is India: A Sacred Geography by Diane L. Eck and I think this book will exceed my expectations.