March 31 syndrome and comedy of errors
EVERY year, budgeting transforms from a disciplined exercise into a chaotic spectacle in India — a phenomenon aptly termed the March 31 syndrome. This frenzied rush to expend every remaining rupee before the financial year ends, often disregarding necessity or value, results in a comedy of errors.
Educational institutions hasten to use unspent funds by organising conferences and workshops. Faculty members find themselves sent to attend programmes of dubious academic merit, sometimes including lavish foreign junkets.
A government corporation’s IT department, desperate to exhaust its budget, once impulsively purchased 50 laptops, 20 servers and 50 software licences — many of which were superfluous. This led to bewildered employees receiving devices for which they had not made any request!
In a northern state, the excise policy has imposed the March 31 deadline on liquor vendors, prompting them to liquidate stocks through ‘buy one, get one free’ promotions that turn their stores into bustling marketplaces.
Meanwhile, procurement teams work feverishly, logging advance payments for undelivered goods and services, while accountants toil to reconcile the figures. Efficiency becomes a secondary concern, deferred to the next fiscal cycle.
This annual scramble stems from systemic flaws, primarily incremental budgeting. Departments receive allocations based on the previous year’s budget, adjusted marginally for inflation or new initiatives. The ‘use it or lose it’ rule incentivises spending every paisa, as unspent funds may result in reduced allocations the following year. Consequently, departments splurge on unnecessary purchases to secure future budgets. This approach perpetuates outdated priorities, allowing inefficiencies to fester. When deficits arise, governments often impose uniform cuts, failing to differentiate between wasteful and essential expenditure. Critical initiatives suffer, while bloated programmes endure.
To counter anticipated cuts, departments inflate future budget requests, akin to ordering extra samosas to feign greater need. This strategic exaggeration shifts the focus from prudent spending to preserving allocations, trapping the system in a cycle of waste.
A more rational alternative is zero-base budgeting, which requires every expense to be justified anew each year. Departments must evaluate operations, explore consolidation, automation, outsourcing or elimination of redundant tasks. This method prioritises purpose over precedent, fostering efficiency.
Better still, why stop at a one-year cycle? Adopting multi-year budgeting frameworks, as practised in countries like Australia, Germany, France, the UK and Italy, could reduce last-minute chaos. Planning two-four years ahead enables strategic, forward-thinking financial management. It’s heartening to note that a beginning has already been made to weave some of these ideas into the fiscal approach of our country. The solution isn’t just better planning — it’s smarter budgeting. And that starts with asking the right questions — before the liquor vendors start hawking ‘buy one, get two free’ next March!
Musings