In which year did India adopt "Zero Based Budgeting"?

The correct answer is 1983.

Key Points

• India adopted Zero Based Budgeting (ZBB) in the year 1983.
• The concept of ZBB was introduced in India by the then Finance Minister, Pranab Mukherjee, in the Union Budget.
• Zero Based Budgeting requires all expenses to be justified for each new period, starting from a "zero base" and analyzing every function within an organization for its needs and costs.
• This budgeting approach aims to eliminate unnecessary expenses and ensure efficient allocation of resources.
• ZBB was first developed by Peter Pyhrr in the 1960s and later adopted by the United States during the presidency of Jimmy Carter.

Additional Information

• Zero Based Budgeting (ZBB)
  • ZBB is a method of budgeting in which all expenses must be justified and approved for each new period, regardless of previous budgets.
  • Unlike traditional budgeting, it starts from a "zero base" and every function is analyzed for its needs and costs.
  • It helps in identifying and eliminating unproductive and redundant activities by prioritizing and allocating resources efficiently.
  • ZBB is particularly useful for organizations facing financial constraints or looking to optimize their spending.
• Benefits of Zero Based Budgeting
  • Encourages cost-effective ways of improving operations.
  • Promotes efficient allocation of resources based on current needs and benefits.
  • Enhances accountability and transparency in financial planning and management.
  • Helps in identifying and discontinuing outdated or non-essential activities and programs.
• Challenges of Zero Based Budgeting
  • Time-consuming and requires detailed analysis and documentation.
  • Can be complex to implement, especially in large organizations with numerous departments.
  • Requires thorough training and understanding among staff and management.
  • Potential resistance from employees due to increased scrutiny and justification of expenses.
• Comparison with Traditional Budgeting
  • Traditional budgeting typically uses the previous year’s budget as a base and makes incremental adjustments.
  • ZBB starts from scratch, requiring every expense to be re-evaluated and justified.
  • While traditional budgeting is less time-consuming, it may perpetuate inefficiencies and outdated spending patterns.
  • ZBB, though more thorough, helps in aligning the budget with current organizational goals and priorities.