Special types of budget

Special types of budget

Zero-based budgeting (ZBB)

  • It is a method of budget planning and preparation that begins at the beginning,
  • It relates to budget planning and preparation from scratch, as the name implies.

  • It focuses on new economic analysis.

  • It is a budgeting strategy based on decisions or projects.

  • Comprehensive decision packages are prioritized and graded based on their significance.

  • It is a complicated budgeting strategy.

  • As an emerging budgeting idea, it plays an important role in overcoming the shortcomings of the old budgeting method.

  • The process of zero-based budgeting involves reviewing and justifying each ministry's expenditure in order to get funds at the start of each fiscal year.

  • Features 

  • Zerobase
    • It operates on the premise that each year, the expected spending for each project/program must begin at zero. 
    • This implies that every year, all budget proposals should be reconsidered with a cost-benefit analysis. ZBB never utilizes the prior year's sums to erase past errors.
  • The emphasis is on activities/programs.
    • Instead of functional departments, the emphasis is on programs or activities.
  • Most appropriate for discretionary expenses
    • ZBB is best suited for discretionary costs such as advertising, R&D, and training.
  • Packages of decisions
    • A budget request is made by a unit by creating 'decision packages' for each action it does. Activity determines funding selections.
  • Cost-effective
    • ZBB assists policymakers in delivering more cost-effective public services.
  • Bottom-up method 
    • ZBB begins with the most basic action and works its way up.
  • Accountability
    • It holds the officials accountable for the amount for which they are liable.
  • It was developed to address weaknesses in standard budgeting systems that prevent authorities from discovering alternative activities.


  • The approach is unbiased, that is, previous information or data bias is removed.
  • Throughout the budget process, ZBB wants staff to work more cohesively and closely together. As a consequence, personnel is highly motivated and interested in completing their tasks quickly.
  • It develops efficient ways and techniques of carrying out tasks.
  • With zero-based budgeting, new technology, procedures, and materials are promoted to help the organization succeed.
  • It distributes resources very efficiently by doing a cost-benefit analysis.
  • ZBB is a management planning technique that aids in the identification of inefficient and superfluous spending items.


  • One of the key disadvantages of zero-based budgeting is that it might encourage short-term thinking by directing resources toward enterprises that will develop assets within the next budgeting period.
  • Heavy Paperwork is a crucial flaw that is to blame for the concept's failure. 
    • The ZBB procedure necessitates an excessive amount of documentation, which can take time for enterprises.
  • The procedure may be exceedingly expensive, as well as time-consuming and difficult to implement. The burden may be insurmountable for businesses with limited resources.
  • Creating a full budget from scratch necessitates the cooperation of many people, yet many departments may lack the necessary time and staff.
  • It is organized in a hierarchical manner. 
    • Organizational hierarchy promotes functional barriers while ignoring possibilities to improve business operations.

Brief about the background of ZBB

  • In 1924, British financial expert Edward Hilton Young introduced the notion of zero-based budgeting.
  • He believed that every item proposed in a budget should be fully justified. ZBB was originally introduced in the United States Department of Agriculture in the 1960s and became increasingly popular in the 1970s.
  • Peter Pyhrr created Zero-Based Budgeting, which is being used today, at Texas Instruments Inc. in 1969.
  • Georgia was the first to implement the approach.

ZBB in India

The ZBB concept was first introduced in India in 1983 by the Department of Science and Technology. The Indian government adopted ZBB as a method for establishing expenditure budgets in 1986. The government mandated that all ministries assess their programs and operations and provide spending estimates based on the ZBB idea. The ZBB system was pushed into the seventh five-year plan. Nevertheless, more progress was needed in this area later on.

Gender-Based Budgeting (GBB)

  • The phrase "gender budgeting" refers to the process of developing or evaluating budgets from a gender perspective.
  • This approach is also known as gender-sensitive budgeting.
  • It is a continual process of considering gender in policy design, implementation, and evaluation.
  • It requires splitting government expenditures to determine their gender-differential consequences, as well as ensuring that gender pledges are turned into fiscal obligations.
  • A gender-responsive budget, as defined by the government of India, recognizes gender trends in society and distributes funds to make policies and programs gender-equitable.
    • It refers to the systematic gender discrimination of budgetary legislation, programs, and policies.
    • India's Ministry of Women and Child Development (MoWCD) is the lead agency for GBB implementation.
    • The Ministry of Finance, in collaboration with the National Institute of Public Finance and Policy (NIPFP), also conducts GBB research in order to develop gender budgeting matrices.

Need for GBB

  • Gender imbalance impedes a country's overall growth and development. The economic case for advocating a gender-sensitive budget stems from concerns about efficiency and equality. The motivation for gender budgeting stems from the observation that national budgets affect men and women differently due to resource distribution patterns. 
  • This process can be helpful for the government to promote equality via fiscal policy by assessing the multiple consequences of a budget on men and women.
  • Empowering authorities at the district and panchayat levels who deal with day-to-day ground realities.

Advantages of Gender Budgeting

  • It results in higher female economic engagement.
  • It aids in the empowerment of women.
  • It contributes to the expansion of the Gross Domestic Product (GDP).

Disadvantages of Gender Budgeting

  • Gender budgeting is a challenging process.
  • In the context of Integrated Child Development Services, it was allocated 100% for women, yet it serves both men and women. Several plans make it difficult to distinguish between beneficiaries.

Gender budgeting in the context of India

  • It was created in the 2001 Union Budget to address the idea of gender disparity.  For the first time, the National Institute of Public Finance and Policy (NIPFP) examines the Union Budget 2001-02 from a gender perspective.
  • It was implemented in 2004-05 based on the suggestions of a Ministry of Finance expert group on "Classification of Budgetary Transactions."
    • Parts of the Gender budget include
      • Part A includes women-specific schemes with a 100% female allocation (for example, Beti Bachao Beti Padhao, Ujjawala, Mahila Shakti Kendra, Anganwadi, etc.)
      • Part B includes the pro-women’s scheme that allocates at least 30% of funds to women (for example, the Mid-day meals program, PM Poshan, etc.)
  • In 2007, the then-Indian Finance Minister makes a specific mention of it in his The Department of Spending released a charter in 2007 detailing the makeup and activities of Gender Budgeting Cells (GBCs).
  • The Planning Commission emphasized in 2010 that the Ministry of Finance and MoWCD shall use Gender Responsive Budgeting or Gender Budgeting solely in place of the Women Component Plan.
  • The MoWCD said that 27 states/UTs had implemented Gender Budgeting by 2021.

Outcome budget or Outcome-Based Budgeting (OBB)

  • A micro-level budgeting procedure is a micro-level budgeting procedure that establishes measurable physical objectives for each proposed project under several ministries.
  • It is used to establish a relationship between the funds spent by the government and the outcomes that result.
  • It assesses both the quantitative and qualitative components of the budget.
  • It increases the budget's accountability and transparency.
  • It serves as a progress report on what various Ministries and departments have accomplished in a given year.

Importance of outcome budget

  • Traditional budgeting has concentrated on reducing the fiscal deficit and boosting expenditures for each scheme, program, and so on.
  • A developing country faces more targets, particularly in many social sectors.
  • Leakage, corruption, and other issues impede public spending.
  • The development process must be efficient and rapid in order to bring a larger population under excellent human development standards.
  • Outcome-based budgeting improves overall performance and aids in medium- and long-term planning.


  • The approach improves openness and engagement in the budgeting process. It will eventually promote transparency and involvement in the budgeting process. It allows stakeholders to see the connections between cash given and projected results.
  • The government department streamlined budgets, decreased expenditures, and linked the budget with performance as a result of increased openness of costs, resources spent, and performance.
  • The relationship between money and performance examines the success of various government programs, strengthening the government's accountability to the people.
  • It encourages coordination and collaboration across many ministries and government bodies.
  • It also helps to define politicians' and civil workers' roles and duties in attaining specified goals.
  • This approach helps in cost reduction by identifying budgets that do not contribute enough to results and refocusing attention on key areas where spending might be more effective.


  • Accurate and meaningful outcome-based data requires difficult methodologies and many technicalities.
  • Tying funding to performance may incur additional expenditures and complicate budgeting.
  • Rather than finance, numerous factors influence the outcomes of certain initiatives. As a result, finding a clear link between resources invested and Getting outcomes accomplished can be difficult for single budgets driving numerous goals.
  • There are difficulties in defining measurements and refining sub-outcomes; many services are based on legislative duties, which might impede resource reallocation and flexibility over particular outcomes.

Outcome budgeting in India

  • P. Chidambaram, the Finance Minister at the time, originally proposed it in 2005-06. 
    • In economic terms, such a system serves as a micro-level performance-based financial planning and management tool.
  • Outcome budgeting was implemented in India to reform prior performance budgeting in 2005-06 to increase openness in the budgeting process.
  • Non-plan programs with quantifiable and deliverable results were also included in 2006-07.
  • Since 2008, the result and performance budgets have been consolidated and submitted to parliament as a single document, dubbed the Outcome Budget.
  • Few issues with outcome-based budgeting– 
    • Like its administration, it needs a rigorous mechanism for monitoring performance indicators and pricing services and initiatives.
    • In the implementation of OBB, there is the impediment of institutional opposition.
    • The OBB has yet to establish itself as a powerful fiscal tool for influencing government spending decisions. They incur more significant expenditures since the additional study is required prior to distributing monies.

Interim budget

  • Before the General Lok Sabha Elections, which are held every five years, the ruling government usually submits an interim budget.
  • An Interim Budget is comparable to a Union Budget.
  • In the Interim Budget, the current government estimates its expenditure, revenue, fiscal deficit, financial performance, and expectations for the coming fiscal year.
  • The current government prepares an interim budget for three to four months towards the end of its term in order to keep the nation running properly.
  • If the present administration is re-elected, the Interim Budget will most likely outline the government's economic projection for the next five years.
  • It does not make any major policy announcements during the Interim Budget, which may financially burden the next administration when the full Union Budget is delivered.
  • The Interim Budget will include information on the preceding year's income and spending.
  • It also specifies the expenditures for the next several months until the charge is implemented by the next administration. Nevertheless, the sources of revenue will not be specified in the Interim Budget.

What is the Interim Budget Procedure?

  • The government's vote-on-account is cleared by Parliament, allowing it to meet its responsibilities until the next Parliament analyses and passes a comprehensive Budget for the balance of the year.
  • The vote-on-account is allowed for four months when the government changes due to General Elections rather than a loss of faith vote scenario the government changes due to General Elections rather than a loss of faith vote scenario, the vote-on-account is allowed for four months.
  • The government is constitutionally allowed to make tax changes in the interim budget, but every outgoing government has respected the fact that it is only a custodian for a few months and has refrained from making major changes or introducing new schemes or plans in every interim budget since Independence.


  • A vote-on-account comprises solely the government's expenditures.
  • It enables the government to cover its costs during the short-run leading to the elections.
  • Normally, the vote-on-account is valid for two months. The entire budget is valid for one year.
  • The interim budget is used to pass the vote-on-account.

When was the interim budget presented in India

  • On November 26, 1947, by R. K. Shanmugam Chetty, following the suspension of the Constituent Assembly's Budget enacted in March 1947 due to the partition.
  • In 1952-53, CD Deshmukh presented before the first General Elections.
  • In 1957-58, by T T Krishnamachari, soon before the second general election.
  • In 1962-63 and again in 1967-68 by Morarji Ranchhodji Desai.
  • In 1971-72, by Y B Chavan Haribhai 
  • In 1977 by M Patel. 
    • It was the shortest interim budget speech ever delivered, as well as the first time an interim budget was delivered by a finance secretary and a former bureaucrat. 
  • After the Janata administration lost power to Congress in 1980-81, R. Venkataraman took charge.
  • After the demise of the Chandra Shekhar administration in 1991, Yashwant Sinha wrote this.
  • Dr. Manmohan Singh's sole interim budget for 1991-1992.
  • By Yashwant Sinha for the government of Atal Bihari Vajpayee in 1998-1999.
  • In the final year of the Atal Bihari Vajpayee-led NDA government in 2004-05, by Jaswant Singh.
  • Pranab Mukherjee, near the end of the UPA's first term, in 2008-09.
  • On February 17, 2014, at the end of the UPA's second term, P Chidambaram.
  • By Piyush Goyal in 2019, before the completion of the first term of PM Narendra Modi's NDA government.

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