The government is working out when to implement the move to a new financial year.
Sources said the government was mulling between the option of implementing the move from 2018 or 2019, after taking an in-principle decision to switch the financial year cycle.
“There is overall consensus that starting the financial year from January 1 will be more effective than the current April 1. But when to implement it is the main issue,” said a person familiar with the development, noting that the economy is just settling down after demonetisation and the implementation of the Goods and Services Tax.
Moving to a January 1 financial year from 2018 will mean that the Finance Ministry will have to further advance the Budget schedule and get to work on it over the next few months.
“In such a case, the Budget for 2018 will have to be presented towards the end of this year. It will also mean a lot of accounting changes,” said the person.
But doing it from 2019 could also be rife with challenges as it will be the year for General Elections.
“A decision will be taken soon,” he said.
Sources said that apart from the option to start the financial year from January 1, other options such as switching to a calendar based on the monsoon or Diwali was also discussed.
“But all of them have uncertainties in terms of dates and would not have been very practical,” said another source.
The Finance Ministry had in July last year set up an expert panel led by former Chief Economic Advisor Shankar Acharya, to examine the “desirability and feasibility” of having a new financial year.
The committee is understood to have recommended moving to a new fiscal year cycle of January to December. The Centre had also urged States to do so and Madhya Pradesh has already announced switching to the new fiscal year cycle.
International agencies and many other countries also follow the January to December financial year, and it is felt that it helps to improve the flow of expenditure starts before the monsoon sets in.
To improve efficacy of its spending, the Centre had last year also advanced the Budget timeline to ensure it is passed by March 31 and had also scrapped the distinction of Plan and Non-Plan expenditure.