TYPES OF BUDGETING SYSTEM
Prominently Budgeting is done with the following methods:
INCREMENTAL BUDGETING :
- The most conventional budgeting system, widely adopted across many countries, is a method where a new budget is developed by implementing only minor adjustments to the existing year's budget.
- This approach utilizes either the previous year's budget or actual performance as basis of the budget, with additional incremental amounts included for the upcoming budget period.
- Since it is based on last year's budget, consistency and stability over time are maintained.
- Resource allocation for the current year depends upon allocations from the prior period. This method of budgeting does not require any extensive analysis or calculations.
- This budget is very simple in its implementation, which aids management in saving time and simplifying calculations.
- With this budgeting method, the effects of any adjustments in the current year’s budget can be readily observed and recognized. This is due to the fact that the budget remains consistent and almost remains unchanged from year to year.
- Significant variations in the subsequent year's budget are rare; thus, if management enacts any major modifications, they can be easily detected, and the repercussions can be clearly seen.
On negative side :
- It does not encourage innovation, as it simply follows last year's budget line items with incremental adjustments.
- This method is not advisable, as it overlooks evolving conditions and the changing environment.
- Additionally, it fosters a mindset of "spend up to the budget" to secure a suitable allocation for the following period, leading to a "spend it or lose it" attitude.
Zero-based budgeting (ZBB) :
- It is a budgeting approach where every expense must be justified for the upcoming new period.
- The zero-based budgeting process begins from a "zero base," evaluating the needs and costs of every function within an organization.
- ZBB offers benefits such as improved Efficiency, Accuracy, prevention of Budget inflation, enhanced Coordination and Communication, and a reduction in redundant activities.
- However, Zero-Based Budgeting also has some drawbacks, including High Manpower Turnover, being Time-Consuming, and a Lack of Expertise needed to implement this kind of budgeting.
Gender budgeting (GB) :
Background :
The concept of gender budgeting emerged in response to the global context of economic globalization. Initially, countries within the Commonwealth took the lead in implementing gender budgeting initiatives. During the Seventh Plan (1987-1992), 27 significant schemes aimed at women were identified for monitoring to evaluate the amount of funds and benefits received by women. The Eighth Plan emphasized the importance of ensuring a specific allocation of funds from general developmental sectors to women. The Ninth Plan introduced the Women's Component Plan (WCP), which sought to allocate 30% of funds specifically for women-related sectors. The Tenth Plan aims to connect the concepts of the WCP and gender budgeting.
Budget 2016-17 mentions that:
“Gender Budgeting in its simplest connotation is 'Gender Analysis' of the budget aimed at examining the budgetary allocation through a gender lens.”
- Gender
budgeting represents the integration of a gender perspective into the
budgetary process,policy development, implementation, and assessment.
- Gender
budgeting in India have gender specific programmes in the
budget under various ministry budgets and it
has separate gender budget statement attached as
part of the general budget.
- In
India, gender budgeting is a developing field and goes beyond merely
accounting.
- Gender
budgeting enhances transparency concerning the factors that underlie
political decisions related to the budget.
- It
promotes increased accuracy and sustainability since available funds are
better aligned with the actual needs of various social groups.
- Gender
budgeting is a process that exposes the discriminatory effects of
financially impactful decisions and facilitates a gender-equitable
reshaping of resource allocation choices.
- It
serves as a means to implement gender equality goals, even during periods
of larger budgetary allowances.
OUTCOME BASED BUDGETING :
Output vs Outcome :
1.We have Total sanitation campaign since 1999 and on records there were toilets constructed in rural areas throughout the country but still people defecated in open. Construction of toilets in numbers is Output while habit of using toilet is outcome. So in case of TSC, output was there but outcome was not there.
2.Sarve Shiksha Abhiyan (SSA) is operational since 2002 and target was to educate all children between 6-14 age by 2010.But ASER report-2023 published by NGO PRATHAM observed that over 50 % of the children in the age group of 14-18 years are not able to do elementary calculations. So,Bringing children to school is output but learning abilities is outcome.
In view of such aspects, outcome budgeting becomes of significance.Outcomes refer to the ultimate products and results of various government initiatives and interventions, including collaborations with state governments, public sector undertakings, autonomous organizations, and the community. They are represented in terms of qualitative targets and achievements, enhancing the comprehensiveness of the technique.
- One of the prominent budgeting methods currently practiced in India is outcome-based budgeting.
- This approach involves outlining and estimating the results of each program or scheme that has been developed.
- A noteworthy aspect of outcome-based budgeting is that program outcomes are evaluated not solely in monetary terms but also through physical achievements expressed in actual figures, such as kilowatts of energy generated or tons of steel produced.
- Additionally, outcomes are conveyed in terms of qualitative targets and accomplishments to enhance the overall technique's comprehensiveness.
- This method assesses the developmental outcomes of all government programs and determines whether funds have been utilized for their intended purposes, including the effectiveness of financial expenditure.
- The outcome budget contributes to improved service delivery, informed decision-making, program performance evaluation, communication of program objectives, enhanced program effectiveness, cost-effective budgeting, accountability establishment, and better management of schemes.
- Outcome budgeting shifts the focus of government programs from being oriented around expenditures to being focused on results.
- Starting from 2007-08, the former Performance Budget was integrated with the Outcome Budget, leading to a single document known as the Outcome Budget. All ministries are required to prepare outcome budgets to ensure that budgeting is directed towards achieving specific targets.
