IEcoS (Economic Services) Indian Economics Budgeting and Fiscal Policy-Fiscal Responsibility and Budget Management (FRBM) Act Terms and Persons (Page 4 of 4)

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Revenue Budget

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The budget of the central government is divided into two: revenue budget and capital budget.

Revenue budget involves revenue receipts and revenue expenditure. These expenditures and receipts are related to the day to day functioning of the government.

Expenditure is needed to finance government functions like defense, social services, administration etc. and these are the main revenue expenditures.

Similarly, when the government is performing its day today functions, lot of revenue will be accrued to it. Tax revenues and non-tax revenues are the two types of revenue receipts.

Zero Based Budgeting

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Zero based budgeting is a budgeting technique. Zero based budgeting is a practice where all expenditure is allocated, and revenue estimates are made for a new period. Cleary, as the name indicate, zero-based budgeting starts from a “zero base” . Everything including expenditure and receipts are beginning from a scratch under ZBB. Budget estimates for each Ministries or heads are provided on the basis of what is needed for the upcoming period, regardless of the budget activity of the previous years.

ZBB is a budgeting process that allocates funding based on program efficiency and necessity rather than budget history. It may be a rolling process done over several years. However, ZBB is a time-consuming process that takes much longer time than traditional, cost-based budgeting.