Zero-based Budget

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Union Finance Minister Nirmala Sitharaman holds a folder-case containing Budget 2022-23, in New Delhi (Photo: PTI)

Nirmala Sitharaman

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	As the name suggests, zero-based Budget refers to planning and preparing the Budget from scratch or &lsquo;zero base&rsquo;. It is different from a traditional Budget that is based on previous Budgets. The process of zero-based budgeting involves review and justification of each and every ministry&rsquo;s expenditure in order to receive funding at the beginning of each financial year.</div>
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	In zero-based Budget, no balances are carried forward, or there are no pre-committed expenses. Simply put, it is a procedure for preparing a Budget with zero prior bases. This concept emphasises identification of a task and funding of costs irrespective of the current structure of expenditure.</div>
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	Zero-based Budget is built around what is needed for the upcoming period, regardless of whether each Budget is higher or lower than the previous one.&nbsp;&nbsp;</div>
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	Under zero-based Budget, all budgeting begins from a &lsquo;zero base&rsquo; every year; that is, expenses must be justified afresh each year, no matter what was spent in the year before. While traditional budgeting calls for incremental increases over the previous year and tends to perpetuate waste, this form of budgeting puts pressure on spenders to justify expenses each time, and reduce costs.</div>
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	<strong>Here is an example of how zero-based budgeting works.</strong></div>
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	Suppose crores of rupees are allotted to MPs every year under a government scheme. Only a fraction of that is spent and they are allowed to be carried forward. In zero-based budgeting, this money would not be allotted to those who did not spend; the money will be spent where it is needed more or used more effectively. Much bigger gains will mount up when hundreds of crores will have to be justified across departments.</div>
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	Zero-based budgeting identifies alternative and efficient methods of utilising limited resources.</div>
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	ZBB was rejected by policy experts owing to the process being an impractical budget-making decision. However, after the global financial crisis of 2008, ZBB came back into the focus for its emphasis on judicious spending during the Budget formation.</div>
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	<strong>Zero-based budgeting in India</strong></div>
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	In India, the ZBB was adopted by the department of science and technology in 1983. In 1986, the Indian government implemented ZBB as a system for determining Expenditure Budget. The government made it compulsory for all ministries to review their activities and programmes and prepare their expenditure estimations based on the concept of ZBB. In the seventh Five-Year Plan, the ZBB system was promoted. However, not much progress could take place later.</div>

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What is Zero-based Budget, Zero-based Budget Definition, Zero-based Budget News

What is Zero-based Budget

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	The revenue budget consists of revenue receipts of the Government of India and the expenditure met using that revenue. The revenue budget details the sources from where the revenue is coming to the government. The government&#39;s sources for revenue are tax collected from people and corporations. The government also makes investments through various instruments and receives interest and dividends on those. Its non-tax revenue includes the disinvestments that the government does in the companies where it holds stakes. This also accounts for the revenue for the government.&nbsp;</div>
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	According to the Budget Estimates of 2019-20, the revenue receipts of the government are likely to come around Rs 19,62,761 crore. Of this, Rs 16,49,582 crore is expected to come in the form of tax revenue and the remainder as non-tax revenue. According to the BE of 2019-20, the corporation tax should generate a revenue of Rs 7,66,000 crore for the government. Income tax, on the other hand, may come close to Rs 5,69,000 crore. The government can have Rs 1,55,904 crore via customs duty in its coffers. The revenue through GST collection for Budget estimate 2019-2020 may come around Rs 6,63,343 crore.&nbsp;</div>
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	In the non-tax segment, the total for interest receipts, dividends and profits is expected at Rs 1,77,239 crore. Fiscal services, general services, social and community services, and economic services may amount to Rs 1,32,783 crore.<br />
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		<strong>Source of Tax Revenue</strong></div>
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		The government generates its revenue from taxes and several other non-tax revenue sources. Tax is one of the major sources of revenue for the government to carry out its work. Tax revenue can be classified into a few major categories &mdash; corporation tax, tax on income, Customs, Union excise duties, service tax, and several others.</div>
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		Corporation tax is the biggest source of revenue for the government. Public and private companies registered under the Companies Act, 1956, are liable to pay corporation tax. Corporation tax is levied on the net income of the company. The collection, surcharge, cess and other receipts make up the huge chunk of the revenue.</div>
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		Tax on income is the other source of income for the government. Tax is levied on salaried persons and they are categorised in several tax brackets with different tax rates. The tax on income includes collections, surcharges, Securities Transaction Tax (STT), and other such kinds of charges.</div>
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		Wealth tax includes tax on real estate, tax on other kinds of wealth, and gift tax. The revenue generated by custom duties include import duties, basic duties, and duties levied on specific items. Cess on export and export duties also contribute to the same. The union excise duties levied on several items also contribute to the tax revenue.</div>
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The revenue budget consists of revenue receipts of the government and its expenditure. Learn more about revenue budget, revenue receipt, revenue expenditure and more revenue budget-related news here at Business Standard.

What is Revenue Budget | Revenue Receipt | Sources of Tax Revenue

Revenue Budget

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	Capital Budget consists of capital receipts (like disinvestment, borrowing, loans from public or foreign governments, Reserve Bank of India, etc) and capital expenditure (like expenditure on development of machinery, health facilities, etc).</div>
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	Capital budgeting comprises two words &mdash; &#39;capital&#39; and &#39;budget&#39;. It implies setting targets for projects/schemes to ensure maximum profitability.</div>
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	<strong>Parts of Capital Budget:</strong> Capital budget is divided into two parts &mdash; capital receipts and capital expenditure.</div>
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	<strong>Capital receipts in Union Budget</strong></div>
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	Capital receipts refer to incoming cash flows. They can be both non-debt and debt receipts. Loan from the general public, foreign governments and RBI form a major part of capital receipts.</div>
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	<strong>Example of capital receipts:</strong> Recovery of loans and advances given to state governments and foreign governments, disinvestment proceeds, money accrued to the government from issue of bonus shares, etc, are all examples of non-debt capital receipts.</div>
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	Debt receipts are those which the government needs to repay along with interest. Most of the government&#39;s capital receipts are debt receipts. They are shown as liabilities in the government&rsquo;s balance sheet.</div>
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	<strong>Capital expenditure in Union Budget</strong></div>
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	Capital expenditure is the expenditure on the development of machinery, equipment, building, health facilities, acquisition of assets like land, research &amp; development, education, etc.</div>
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	<strong>Examples of capital expenditure: </strong>Loans given by the government to states and public-sector undertakings (PSUs), loans that were taken in the past but are now returned, spending on infrastructure, machinery, land, road, etc.</div>
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Learn What is Capital Budget, Capital Budget Meaning, Types and more budget related news here at Business Standard.

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