Finance minister Arun JaitleyYet another vestige of colonial-era conventions will be flown out the window when union finance minister Arun Jaitley presents the budget in Parliament today, a month earlier than the usual date. Does the timing of the budget really matter? Yes, if you factor in the standstill caused by the onset of monsoon in India.
Development work is ground to a halt across the government departments as soon as the monsoon showers hit the subcontinent. No department ever gets the funds allocated in the budget before the rainy June in the expiring financial calendar.
By the time the government presents the budget in late February and Parliament passes it and all the paperwork is done, it would be invariably June. The projects would not be kicked off before September or even October. That leaves the departments hardly six months to utilize the funds.
In the new scheme, the government expects to finish the formalities by the end of March and to kick off the works in April, ensuring a full year for the departments to finish the projects.
The government is also faced with demands to switch to a financial year starting January. Most of the countries have a financial year that corresponds to the calendar year. The L K Jha Committee appointed by the government in 1984 had also recommended the advancement of the financial year by three months.
The early presentation of the budget has a flip side. Since the groundwork for the early budget has to start at least in December, the planners are working without data from the last three months of the financial year that ends in March. As a result, the 2017-18 budget is based only on data from nine months of the current financial year. Even the GDP data may not be complete. And this is not a one-time issue.
The problem is aggravated by a lack of data on the effects of the demonetization. The government withdrew the Rs 1,000 and Rs 500 notes on November 8 and it does not have enough data to fathom the aftershocks in the most important financial document after that.
Not even the Reserve Bank of India had the full data on the deposits of invalid notes in banks at the time the budget was written.
