July 27, 2017

The BJP government under Atal Bihari Vajpayee moved from the colonial 5 pm Budget presentation — to suit UK timing — to 11 am, which allowed Indian markets to react to it the same day.

The Narendra Modi one improved on this by scrapping a separate railway budget, another colonial hangover, and also removed the artificial Plan-non-Plan distinction; this year, it also brought forward the date of the Budget by a month to ensure actual spending could start by April 1. From January 2019, even the 150-year-old British April-March fiscal will get a burial. One Budget from now, India will move to a system where the calendar year and financial year will be the same.

This means the next Budget, to be presented on February 1, 2018, will be for nine months, after which a full Budget will be presented for the year beginning January 2019. Most likely, the Budget will be presented in November 2018. Meanwhile, the government is also likely to start recasting all economic data in the calendar year format. While the Shankar Acharya panel set up to make a recommendation on the January-December fiscal had concluded it wasn’t worth the effort, the government believes it will give policymakers a better grip of what is happening in the economy before the Budget. By September-October, the kharif rain pattern is clear and, based on this, a reasonably good estimate can be made of the rabi crop which is heavily influenced by moisture in the soil. So, the logic goes, the Budget can make full allowance for this and change its priorities accordingly.

Critics argue that instead of working on a Budget around the monsoon, what is more important is monsoon-proofing the country. That means more irrigation, the right price signals to ensure the right crops—and not water-guzzlers like rice and sugarcane—are grown in areas with poor rain. It also means building more capacity for storing water—India gets around 2,600 billion cubic metres (bcm) of rain and snow-melt in even a bad year while it needs around 1,100 bcm to meet all requirements, but its capacity to store water is a mere 253 bcm.

Also, it is not true that, in a drought year, the government has the flexibility to make a big addition to expenditure in rural areas. And to the extent it needs to be supplying more fodder or water-trains to drought-hit areas or drought-resistant seeds, the machinery for this is quite independent of the Budget — indeed, if a lot of additional expenditure is required, a mid-term supplementary grant in even an April-March year is quite easy to do.

[The Financial Express]