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A Brief History of Time: The Story Behind the Government's Fiscal Year, RBI's Accounting Year and the Calendar Year

Professor of Financial Economics and Part-time Value Investor, Transfin.
Feb 17, 2020 5:19 AM 2 min read

The RBI recently said that from 2020-21, it would align its financial accounting year (July-June) with the Government’s financial year (April-March). A proposal for the same has been forwarded to the Government for its consideration.


Behind the RBI Year

Why July-June in the first place, you ask? Indian banks follow the April-March fiscal, and compile their annual financial information after that. The RBI, being the supervisor and regulator of banks, analyses this data to produce its Annual Report. To do this, it takes about three more months, hence the lag. (FYI, April + 3 months = July!)


Behind the Fiscal Year

Why April-March, you ask? And to add to that, why January-December?


To answer that, let’s travel back in time to Europe. In the 12th century, under the guidance of the Catholic Church, March 25th was chosen as the beginning of the year because this was exactly nine months before Christmas, so the day when the Virgin Mary was believed to have been informed of her divine pregnancy.


In the following centuries, ambiguity about which calendar to follow persisted. Then in 1582, Pope Gregory XIII proclaimed the Gregorian calendar, which we follow today, in which January is the first month and December the last.


Protestant Britain, however, was suspicious of papal ideas. But it reluctantly agreed to transition to the same calendar as the rest of Europe – except in one matter: the fiscal year, which retained the March-April calendar of the 12th century.


Over time, due to colonialism and globalisation, the Gregorian calendar went global. And because of the British Raj, India retained the March-April fiscal year.


Behind the Calendar Year

PS – the Gregorian calendar has its origins even before in the 1st century BCE, in the Julian calendar, named after Rome’s Julius Caesar. So if you want to know why the year begins with January 1st at all, you can thank Julius Caesar for that.


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