One of the major Union Budget Reforms is the NDA Government’s move to advance the presentation of Union Budget to February. With this decision, India departs from the colonial-era tradition of presenting the Union Budget on the last working day of February.
Union Budget Reforms | Background
- Few months back, the Prime Minister had given a clear indication that Budget 2017 would be presented a month in advance. Mr. Modi had said the new system would ensure speedier implementation of schemes.
- A similar departure from the age old tradition was witnessed during Atal Bihari Vajpayee’s NDA 1 government, when the time of the presentation of the Union budget was changed from 5 PM to 11 AM.
- Another first this time is that the Government has decided to do away with the 92-year old practice of having a separate Railway Budget, merging it with the Union Budget.
Union Budget Reforms | Benefits of advancing the budget
- The advancing of the budget presentation would ensure that the legislative approval for annual spending plans and tax proposals is completed before the beginning of the new financial year on April 1.
- According to experts, the advancement of budget announcement date will help the entire budgetary exercise to be over by March 31 and the Finance Bill to be passed and implemented from 1 April onwards, instead of June.
- It will help companies and households to finalise their savings, investment and tax plans. At present, The Finance Bill and Appropriation Bill containing tax changes and expenditure details respectively are passed in May. Several tax proposals come into effect only after the Finance Bill is passed in May. This raises the opportunity costs for the companies and households.
- It is also said that the advancement of budget presentation would enable Ministries and Departments to ensure better planning and execution of schemes from the beginning of the financial year and utilization of the full working seasons including the first quarter.
- Another highlight of the budgetary exercise this time will be the merger of Plan and Non Plan classification in Budget and Accounts from 2017-18, with continuance of earmarking of funds for Scheduled Castes Sub-Plan/Tribal Sub-Plan. Similarly, the allocations for North Eastern States will also continue.
- Plan/Non-Plan bifurcation of expenditure has led to a fragmented view of resource allocation to various schemes, making it difficult not only to ascertain cost of delivering a service but also to link outlays to outcomes.
Union Budget Reforms | Shifting the calendar year
- The government is also considering shifting the fiscal year to January-December as against April to March at present so as to link the Indian economy with major countries in this era of globalisation.
- NITI Aayog has expressed the need to amend the financial year for better budget planning and it is being contended that 1 January to 31 December will be the best suited as most of the countries in the world follow it.
- The Committee headed by former Chief Economic Advisor Shankar Acharya which was asked to examine the feasibility of having a new financial year beginning January, replacing the April-March period has recently submitted its report to the government.
- If the government decides to shift to the new fiscal year, then it would at least have to wait for the next year to implement it. In fact, if it has to be implemented, then lots of issues need to be sorted out urgently. This would include the passage of the Budget for year 2018 in the current year itself by November. This is a not insurmountable task.
Union Budget Reforms | Conclusion
Hectic work is already on for the passage of the GST bill so that the landmark legislation could bring about drastic changes in the tax system and help India to go on a faster growth trajectory. The Budget 2017-18 is being waited expectantly after re-monetisation and the government’s hints about more measures in the offing to transform the economy. It’s time to align the monetary and fiscal economies. If bank credit growth falls, fiscal deficit may need to go up. If bank credit growth rises, fiscal deficit should reduce. This is particularly true for a growing economy like India.