Essay on Zero Based Budgeting (ZBB)
Like performance or programme budgeting, Zero base budgeting is also “rational” budgeting. Like Management by Objectives (MBO) it is a transplant from the private sector which has so far been, confined to the United States.
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Zero Base Budgeting (ZBB) is an emerging process, adopted’ by a variety of industrial organizations as well as state and municipal governments in U.S.A. ZBB was developed at Texas Instruments Inc. during 1969.
The process was first adopted in government by Governor Jimmy Carter (who later become President of the United States) of Georgia for the preparation of the fiscal 1973 budget.
In India the Union Finance Minister V.P. Singh told a Parliamentary Consultative Committee that the government would be introducing zero-based budgeting at first in a small way in 1986-87 and then in full in budget formulation from 1987-88.
The ZBB technique involves a critical review of every scheme before a budgetary provision is made in its favour. The practice in India or elsewhere under the traditional budgetary process has been to allot funds on an incremental basis irrespective of whether the scheme in question is doing well or it is even worth continuing.
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The ZBB technique, requires a large mass of quantitative data regarding the impact, targets, objectives, standards of performance, evaluation and a comparison among programmes covering, divergent activity.
In the Indian context, the ZBB would perhaps enable the government to abandon a large number of schemes along with agencies whether branded as Plan projects or as non-plan expenditure when they are-proved to have outlived their utility or to have been non-starters despite investments in infrastructure and personnel.
If properly implemented, the technique could help to reverse the trend of large deficits on the revenue of the Union Government and increase from Rs. 294 corers in 1981-82 to about Rs. 5634 corers in 1985-86.
According to Guy Peters, “the most fundamental idea behind ZBB is that the agency should have to-justify its entire budget from the ground up each year”. In contrast, the traditional or incremental budgeting assumes that there is a budgetary base (the previous year’s level of appropriation) that is guaranteed, and there is only a question of how much of an increment will be given. The ZBB was designated to solve this problem.