In order to formulate effective policies regarding financial aspects of a country, it is essential to evaluate a budget, ensuring effectiveness in the usage of resources.

Effectiveness of a nation’s financial policy and resource management lies upon the aspect of an effective budget planning that ensures the efficiency in usage of money and resources and productive allocation that regulates and governs the economical aspects associated with various sectors of products and services that generates a sustainable source of income. Budget planning ensures a general financial regulation prevalent in a country, especially in countries like India, which requires an effective budget allocation regarding the resources available in respect to the density of population. This is an effective measure in the field of governance and formulating economic policies aiming for efficiency and further sustenance.


Budget is the process of estimation of expenses and revenue, during a certain time period and is further compiled and re-evaluated periodically. A budget allocation is a microeconomic concept related to the estimation and regulation of expenses and savings. It can be conducted by a range of populations and sections of society be it a person, an organisation, or the Government.

Personal budget

This form of budgeting is associated with either an individual or a family. In this form of budget, a person or members of a family assesses their monthly source of income and thus formulates a budget allocation for the month in buying food products, expenditure on luxury, and entertainment. This form of budget planning is most prevalent with people belonging to the poor and middle-income class of society with limited sources of income.

Corporate budget

This budget formulation is conducted by an organisation to estimate its valuation and expenditure within a financial year. This estimate is carried out by considering the sales, income, and overall financial trend of the market.

These budgets are developed starting with the financial analogy of the cash flow within the organisation by the previous estimation of income generation. This allocation is formulated considering the transaction with vendors and suppliers and is formulated for all the departments and divisions prevalent in the organisation.

The income budgets are published considering the discounts as received and the relationship of the deals as conducted during the year

These budgets are further summed up into a master budget which includes financial statements, forecasting the overall stream of cash flow, and subsequently an overall economical plan.

Government Budget

The process of budgeting is defined under Article 112 of the Constitution of India as the Union budget. A financial statement is generated annually regarding the expenses and receipts of the government for a particular year. This report maintains a record of the government’s expenditure for a fiscal year ranging from 1st April to 31st March. The Union budget is further subdivided into two categories

Revenue budget – It is associated with the revenue and expenses of the government. The revenue is further classified into tax and non-tax revenue. The expenditure in terms of revenue is generated based on the daily expenditure of the government associated with the citizens of India. In case the expenditure rises beyond the allocated receipt, the government incurs a revenue deficit.

Capital budget – This form of budget is associated with the receipts of capital and payments of the government. It includes public loans, loans from foreign governments. In the case of these receipts, RBI forms the major part of it. Derived money is allocated to several resources and fields like technological advancements, the health sector, infrastructural development, and education facilities. In the scenario where the government expenditure increases more than the revenue a fiscal deficit is incurred


Budget planning is necessary for the process of allocation of income source that is money towards the streams of expenditure at hand. It helps in the process of sustenance and financial feasibility in every sector of society be it an individual, a company, or even a government of a country, there are several policies and procedures that are to be adhered to in a bigger scale budget management however it is necessary to track the expenditure for a person or a family. Thus the budget allocation is necessary for the effectiveness of financial management which otherwise will prove to be problematic.

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