Union Budget 2017 on 1 Feb: End of a colonial hangover for speedy implementation of schemes

Departing from the colonial-era tradition of presenting the Union Budget on the last working day of February, the government on Tuesday finally announced that it will now be presented on 1 February.

The announcement has come a day before the beginning of the month-long Winter Session of Parliament, to be held from 16 November to 16 December.

Prior to this, Prime Minister Narendra Modi on 26 October had given a clear indication that Budget 2017 would be presented a month in advance.

Urging the states to align their plans according to the revised date of budget presentation, Modi had said the new system would ensure speedier implementation of schemes.

While, chairing his 16th interaction through PRAGATI — the ICT-based, multi-modal platform for Pro-Active Governance and Timely Implementation on 26 October, the prime minister had urged all states to align their plans with this advancement, so that they could take maximum advantage of this move.

Union Budget 2017 on 1 Feb: End of a colonial hangover for speedy implementation of schemes

File image of the Indian Parliament. PTI

Why the departure from 28 February?

The Cabinet on 21 September had in-principle decided to end the colonial-era tradition of presenting the budget on the last working day of February — which is generally 28 February and 29 February during a leap year — and advance it by a month, so that the legislative approval for annual spending plans and tax proposals could be completed before the beginning of the new financial year on 1 April.

A similar departure from the age old tradition was witnessed during Atal Bihari Vajpayee’s NDA 1.0 government, when the then finance minister Yashwant Sinha had changed the time of the presentation of the Union budget.

Earlier, the budget used to be presented at 5 pm, but Sinha during Budget 2001, advanced it to 11 am. And, it has become a tradition since then.

The earlier practice was inherited from the colonial era, when the British Parliament would pass the budget in the noon followed by India in the evening of that day.

Besides advancing the Budget day, the Cabinet had also decided in September to do away with the 92-year old practice of having a separate Railway Budget, merging it with the Union Budget.

The decision to merge the two budgets was mooted by Railway Minister Suresh Prabhu and endorsed by NITI Aayog, which also proposed the doing away of the distinction between plan and non-planned expenditure.

Since 1924, the Railways has been having a separate budget, as the British considered it necessary to focus on India’s most important infrastructure network, which went on to become one of the world’s largest rail networks.

How will the new move help?

To facilitate its early presentation, the Finance Ministry had proposed that the Budget Session be convened before 25 January, a month ahead of the current practice.

According to experts, the advancement of budget announcement date will help the entire budgetary exercise to be over by, and the Finance Bill to be passed and implemented from 1 April onwards, instead of June. It’ll help companies and households to finalise their savings, investment and tax plans.

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.

“The advantage here is that the Finance Bill will be passed in the Parliament in the next two months — February and March, and expenditures can begin from 1 April, unlike now. As per the traditional practice, after presenting the Budget in Parliament on the last day of February, the Cabinet has the last month (March) left to get all the legislative approvals for the annual spending and tax proposals before the beginning of the new financial year on 1 April. Early presentation of Budget will help the entire exercise to get over by 31 March, and expenditure as well as tax proposals can come into effect right from the beginning of new fiscal, thereby ensuring better implementation,” economist Professor Arun Kumar told Firstpost.

Area of concern

“Data for the current year is important for the formulation of budget. In the case of 28 February, we get quality data of nine to 10 months. By advancing the budget announcement date by a month, we’ll have a month's worth of less data. Moreover, budget preparations have to be ready by December, so there is a need to speed up the data-availability process. It might lead to chances of substantial error, which is a matter of concern,” added Kumar, former Sukhamoy Chakravarty Chair Professor at the Centre for Economic Studies and Planning, Jawaharlal Nehru University.

Will there be a change in Financial Year too?  

In India, the financial year runs from 1 April to 31 March.

However, the government has also been considering change the financial year — possibly 1 January to 31 December — in sync with the calendar year. It’ll also align India with most countries, besides the World Bank and International Monetary Fund.

“NITI Aayog has expressed the need to amend the financial year for better budget planning and 1 January to 31 December will be the best suited as most of the countries across the world follow it,” a Finance Ministry source said.

The government constituted a four-member committee headed by former Chief Economic Advisor, Dr Shankar Acharya on 6 July to examine the desirability and feasibility of having a new financial year. The committee has been given time to submit its report by 31 December.

Prior to this, the LK Jha committee in 1984 had also recommended the January-December cycle.

For full coverage of Union Budget 2017 click here.

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Updated Date: Jan 13, 2017 20:58:10 IST

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