Since ZBB requires a fresh look at every expense, it helps to eliminate wasteful spending and ensures that resources are allocated to activities that provide the most value. The concept of ZBB was introduced in the 1970s by Peter Pyhrr, a former manager at Texas Instruments. He developed this approach to help organizations allocate resources more efficiently and effectively.
Public Policy and Administration in India
Wind and solar installations must scale up to 4,328 GW, from under 200 GW in 2024. Energy storage—from just 5 GW today—must rise to over 770 GW, mainly via pumped hydro and batteries, per BloombergNEF estimates. While India has expanded its renewable capacity, the momentum is undermined by chronic hurdles—supply chain snags, patchy grid connectivity and high energy storage costs. The focus is on programs or activities instead of functional departments. (1) Financial year from November 1 to October 31, to have a better appreciation of fiscal resources. Explore our comprehensive video library that blends expert market insights with Kotak’s innovative financial solutions to support your goals.
Value Added Services
With these alternatives, the process makes managers consider other ways to operate the business. But that requires political will at home and credible support from abroad. For a nation of 1.46 billion, time is the one resource it cannot afford to squander—because the longer India waits, the narrower its options will become. Achieving net zero by mid-century would require sweeping overhauls across power, mobility and industry—each with significant upfront costs.
- The mechanics and management approach has differed significantly among the organisations that have adopted zero-base and the process must be adapted to fit the specific needs of each user.
- At the same time, with Zero-Based Budgeting, the flexibility allows you to make a new budget every month-to easily adapt to changes in income or expenses.
- The term service level budgeting is sometimes better account of this process.
- The document discusses zero-based budgeting (ZBB) and its relevance for public enterprises in India.
Corporate sector 🔗
Zero-Based Budgeting puts you in the driver’s seat, full in control of your money, so that every rupee has a name and you remain in sync with your financial goals. It allows for conscious spending, regular debt repayment, and saving, at the same time offering the ability to adapt to changing financial situations with ease. Once the activities have been identified, the next step is to evaluate the costs and benefits of each activity. This involves determining the most cost-effective means of carrying out each activity and identifying any potential cost savings or efficiencies. Implementing ZBB can be complex, particularly in large organizations with multiple departments and functions. Coordinating the budgeting process and ensuring consistency across the organization can be challenging.
Zero Based Budgeting in India
By 2022, the hit had jumped to 8%, based on a study by the University of Delaware’s Gerard J. Mangone Climate Change Science and Policy Hub. Asian Development Bank projections indicate that GDP losses could reach 25% by 2070. In May 2020, Cyclone Amphan ripped through eastern India, leaving behind a trail of devastation that wiped out assets worth over $13bn.
This involves a thorough review of each proposal to ensure that all expenses are justified and that resources are allocated effectively and efficiently. The first step in implementing ZBB is to define the objectives and scope of the budgeting process. This involves identifying the key goals and priorities of the organization and determining which departments and functions will be included in the ZBB process.
If the illegal and informal coal economy, including people involved in allied services, is considered, the number touches 15–20mn. Pulling the plug too quickly could devastate communities already on the margins. But delaying too long could prove just as ruinous—climate disruptions threaten to erase the very livelihoods the coal economy sustains. Sure, India’s socio-economic realities make the 2070 goal appear grounded in justified caution.
The idea quickly gained traction and has since been adopted by various organizations and governments around the world, including in India. Imagine you’re tasked with planning a yearly budget for a large organization. Instead of just tweaking last year’s numbers, you start from scratch, justifying every single expense. It is, but it’s also a method that can lead to more efficient and effective use of resources. Welcome to the world of Zero-Based Budgeting (ZBB), a revolutionary approach to fiscal planning that has been gaining traction since its introduction in the 1970s. Zero-based budgeting targets at presenting true expenses to be incurred by a department.
One of the biggest challenges of ZBB zero based budgeting in india is that it can be very time-consuming. Starting from zero and justifying every expense requires a significant amount of time and effort from managers and staff. This can be a major drawback, especially for large organizations with complex operations.
It can be problematic to control or validate expenditure levels for areas of a business that do not produce “concrete,” tangible results. The operational evaluation authorized by zero-base budgeting requires a significant amount of management time. Managers need special training in the zero-base budgeting process, which further increases the time required each year. Several organizations have successfully implemented zero-based budgeting to improve their financial management. For example, Hindustan Unilever Limited (HUL) adopted ZBB to streamline its operations and reduce costs. By scrutinizing every expense, HUL was able to identify inefficiencies and redirect resources towards more strategic initiatives, resulting in significant cost savings and improved performance.
Experiments in green hydrogen and green steel offer hope, but are unlikely to scale within the next 15–20 years unless costs drop dramatically. According to the IEA, green hydrogen production costs in India range between $4 and $5 per kg—more than double the cost of grey hydrogen derived from fossil fuels. Meanwhile, BloombergNEF estimates that green steel production globally remains 60–70% more expensive than conventional methods. Without policy-driven incentives and industrial-scale pilots, these technologies will remain locked in the lab.
Define objectives and scope 🔗
This can lead to significant cost savings and more effective use of resources. While ZBB may present initial challenges, the potential rewards are significant. The future of ZBB in India looks promising, with growing recognition of its potential to address the challenges of a rapidly changing economic landscape. As organizations grapple with the need to do more with less, ZBB offers a structured and disciplined approach to budgeting that can unlock hidden efficiencies and drive sustainable growth. Despite the challenges, the Indian government has periodically revived its interest in ZBB, recognizing its potential for improving fiscal management and resource allocation.
For instance, multinational companies like Unilever and Kraft Heinz have used ZBB to streamline their operations, reduce costs, and improve profitability. There are many budgeting software and tools available that can automate data collection, analysis, and reporting, saving you time and resources. However, challenges remain in terms of widespread adoption and consistent implementation. The complex nature of government operations, resistance to change, and the need for significant organizational restructuring can hinder progress. However, the challenges of implementation, including the time and resource commitment required, have deterred some companies from fully embracing ZBB. Additionally, the need for organizational change and a strong commitment from leadership can be significant barriers to adoption.
- In some cases, private businesses have been more prosperous through this exciting process than governments.
- It differs from traditional budgeting processes through investigating all expenses for each new period, not just incremental expenditures in obvious areas.
- In India, the principle of ZBB was initiated in the Department of Science and Technology in 1983.
- India’s early transition could reset the climate clock across the Global South.
Evaluate costs and benefits 🔗
Democratic development is what should be writ large on the budgetary theory of a fast transforming society in India. ZBB can be adapted to various organizations, regardless of their size or industry. However, it may be particularly beneficial for organizations facing financial challenges, undergoing significant change, or seeking to optimize resource allocation. In the Indian context, ZBB is gaining momentum as a tool for driving economic growth, improving infrastructure, and achieving broader national goals.