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A budget is a calculation plan, usually but not always financial, for a defined period, often one year or a month. A budget may include anticipated sales volumes and revenues, resource quantities including time, costs and expenses, environmental impacts such as greenhouse gas emissions, other impacts, assets, liabilities and cash flows. Companies, governments, families, and other organizations use budgets to express strategic plans of activities in measurable terms.[1]
Preparing a budget allows companies, authorities, private entities or families to establish priorities and evaluate the achievement of their objectives. To achieve these goals it may be necessary to incur a deficit (expenses exceed income) or, on the contrary, it may be possible to save, in which case the budget will present a surplus (income exceed expenses).
In the field of commerce, a budget is also a financial document or report that details the cost that a service will have if performed. Whoever makes the budget must adhere to it and cannot change it if the client accepts the service.
A budget expresses intended expenditures along with proposals for how to meet them with resources. A budget may express a surplus, providing resources for use at a future time, or a deficit in which expenditures exceed income or other resources.
The budget of a government is a summary or plan of the anticipated resources (often but not always from taxes) and expenditures of that government. There are three types of government budgets: the operating or current budget, the capital or investment budget, and the cash or cash flow budget.[2]
The federal budget is prepared by the Office of Management and Budget, and submitted to Congress for consideration. Invariably, Congress makes many and substantial changes. Nearly all American states are required to have balanced budgets, but the federal government is allowed to run deficits.[3]
The budget is prepared by the Budget Division Department of Economic Affairs of the Ministry of Finance annually. The Finance Minister is the head of the budget making committee. The present Indian Finance minister is Nirmala Sitharaman. The Budget includes supplementary excess grants and when a proclamation by the President as to failure of Constitutional machinery is in operation in relation to a State or a Union Territory, preparation of the Budget of such State.[citation needed] The first budget of India was submitted on 18 February 1860 by James Wilson. P C Mahalanobis is known as the father of Indian budget.
Philippines
The Philippine budget is considered the most complicated in the world, incorporating multiple approaches in one single budget system: line-item (budget execution), performance (budget accountability), and zero-based budgeting. The Department of Budget and Management (DBM) prepares the National Expenditure Program and forwards it to the Committee on Appropriations of the House of Representatives to come up with a General Appropriations Bill (GAB). The GAB will go through budget deliberations and voting; the same process occurs when the GAB is transmitted to the Philippine Senate.
After both houses of Congress approves the GAB, the President signs the bill into a General Appropriations Act (GAA); also, the President may opt to veto the GAB and have it returned to the legislative branch or leave the bill unsigned for 30 days and lapse into law. There are two types of budget bill veto: the line-item veto and the veto of the whole budget.[4]
A personal budget or home budget is a finance plan that allocates future personal income towards expenses, savings and debt repayment. Past spending and personal debt are considered when creating a personal budget. There are several methods and tools available for creating, using, and adjusting a personal budget. For example, jobs are an income source, while bills and rent payments are expenses. A third category (other than income and expenses) may be assets (such as property, investments, or other savings or value) representing a potential reserve for funds in case of budget shortfalls.
Organisations may produce [7] functional budgets, relating to activities, and / or cash budgets, focused on receipts and payments. Incremental budgeting starts with the budget from the previous period, while under zero-based budgeting activities/costs are included only if justified. Under all approaches expected sales or revenue, is typically the starting point; [7] this will be based on the business' planning for the period in question. Directly related elements and costs are typically linked to these (activity based costing may be employed). Support and management functions may be revisited, and the resultant "fixed" costs, such as rent and payroll, will be adjusted - at a minimum for inflation. Capital expenditure, both new investments and maintenance, may be budgeted separately; debt servicing and repayments likewise. The master budget [7] aggregates these all. See Financial forecast, Cash flow forecast, Financial modeling §Accounting.
Criticism is sometimes directed at the nature of budgeting, and its impact on the organization. [10][11] Additional to the cost in time and resources, two phenomena are identified as problematic: First, it is suggested that managers will often "game the system" in specifying targets that are easily attainable, and / or in asking for more resources than required,[7] such that the required resources will be budgeted as a compromise. A second observation is that managers' thinking may emphasize short term, operational thinking at the expense of a long term and strategic perspective, particularly when [12]bonus payments are linked to budget. See Strategic planning §Strategic planning vs. financial planning.
Green Budget
Green budgeting[13] refers to the use of budgetary policy-making tools to better understand environmental impact of spending choices, and ensure public budgets are aligned with climate and environmental objectives. It can help in organised mapping and tracking schemes, outlays, and expenditures, which, in turn, can support coordinated policy design and identification of periodic and continuous finance needs to achieve green objectives[14].
Evolution of Green Budgeting
The concept of green budgeting was first implied in the ‘Report of the World Commission on Environment and Development: Our Common Future Brundtland Commission Report’[15] of 1987, which urged central agencies to integrate sustainability into public policy and financial planning.
European countries such as France, Germany, UK, Norway and Italy integrated environmental considerations into fiscal and public finance management[16]. Many European subnational governments even experimented with methodologies like ecoBudget and City and Local Environmental Accounting and Reporting (CLEAR) to link environmental considerations to budgetary processes[17]. In the Asia Pacific regions climate budget tagging is more prevalent. Countries like Bangladesh, Nepal, Cambodia, India, Indonesia, Philippines, and Pakistan have emphasised on climate-oriented public financial management[18].
There are different ways/tools to integrate environmental issues in environmental fiscal responsibility is taxes, pricing, and subsidy shifts to achieve green goals.[19]
Green budgeting is envisaged to have six pillars[20]:
Mainstreaming for environmental sustainability
Resource allocation for environmental sustainability
Planning and coordination for environmental sustainability
Evaluation and monitoring for environmental sustainability
Transparency and accountability for environmental sustainability
Policy signals for greening initiatives
Adoption in India
As of 2025, several Indian states and Union Territories have advanced significantly in adopting green budgeting[21] . Bihar has shown progression and has expanded its green budget more than four and a half times since 2020–21 and tripling the number of schemes included. Assam has also moved rapidly, increasing its green budget by 1.6 times within two years and nearly sixfold in the number of tagged schemes. Puducherry, the first Union Territory to introduce green budgeting, has raised its allocation by 3.6 times between 2022–23 and 2025–26. Alongside these frontrunners, states such as Meghalaya, Odisha, and Rajasthan have initiated their own climate- and environment-focused budgeting processes, indicating a broader national shift toward environmentally informed public finance.
Bihar
Bihar became the first state in India to formally institute green budgeting in FY 2020–21 with an initial mapping of departmental schemes for environmental relevance. Jal Jeevan Hariyali programme was the prime anchor in establishing this initiative[22]. Over the subsequent years, the scale of this exercise expanded. As compared to the first cycle (FY 2020-21), in the sixth cycle (FY 2025-26), the number of identified green-relevant schemes/ budget heads have nearly tripled and green budgetary allocations have become four-fold.
The state employed a Rio marker–inspired tagging system, assigning departmental budget codes to schemes and programmes. FY 2025-26, the share of green budget in state's GSDP is 1.42 percent, while the share of green budget in state's total budget is 4.92 percent in 2025-26[23] . Some green schemes include afforestation, watershed development, flood control, soil conservation, water infrastructure, urban environmental services and disaster management.
Puducherry
Puducherry[24] was the first union territory to come up with a green budget. Introduced as part of the Union Territory’s 2023–24 Budget, the initiative seeks to embed climate and environmental considerations across departmental schemes. It highlights Puducherry’s response to its ecological vulnerabilities - coastal erosion, groundwater depletion, pollution, waste generation, and climate-induced risks.
The methodology adopted for the 2023–24 green budgeting exercise follows a multi-dimensional approach mapping where schemes and department are mapped with activities, themes and SDGs, A bottom-up, scheme-based approach is used for identification of environmental components. A baseline exercise was also undertaken. The Finance Department and the Department of Science, Technology and Environment (DSTE), with technical support from Puducherry Climate Change Cell and The Energy and Resources Institute (TERI), coordinated a seven-step process encompassing departmental orientation, pro-forma design, identification of green budget line items, theme and activity mapping, SDG alignment, consolidation of inputs, and preparation of the Green Budget Report. The Green Budget increased from ₹191 crore in the 2022–23 baseline to ₹690 crore in 2025-26, which is a more than three-fold increase. In the baseline, 9 departments had green components. Post the implementation of green budgeting, 21 departments have shared the quantum of green budget[25] .
Assam
Assam introduced its green budget in 2023–24[26], becoming the first northeastern state to do so. The exercise is positioned against the state's high climate vulnerability i.e., frequent floods, erosion, biodiversity loss, and rising emissions due to rapid urbanisation. The Green Budget seeks to mainstream climate resilience into public finance through structured expenditure tagging, interdepartmental coordination, and integration with existing frameworks such as SAPCC 2.0 (2021–2030), Renewable Energy Policy 2022, Assam Agenda 2030, and the SDG-linked Outcome Budget. The Green Budget increased from ₹2,314.1 crore in 2023–24 to ₹3,711 crore in 2025–26, reflecting a 1.6-fold rise[27] .
The Green Budget adopts a methodology rooted in a line-by-line assessment of schemes using four categories - Highly Favourable (Green), Moderately Favourable (Yellow), Neutral (Grey), and Less Favourable (Brown) based on their environmental and climate impacts. 14 key departments were identified and mapped to nine climate-vulnerable sectors identified under SAPCC 2.0: agriculture, water, health, forestry, energy, strategic knowledge, disaster management, human settlements, and transport. Schemes were additionally tagged across three identified domains: climate mitigation, climate adaptation, and environmental sustainability.
Green budgeting can function as an instrument that not only supports planning within the current fiscal space but also helps broaden it by identifying opportunities to access international climate finance and other green funding sources. Although there is ongoing discussion about standardising and harmonising green budgeting methodologies, such alignment should not undermine the flexibility required to adapt frameworks to evolving policy needs.
The Energy and Resources Institute (TERI), an Indian research institute proposes an approach that incorporates multiple analytical perspectives and tools to support policy formulation. This model preserves the ability to add new dimensions over time, allowing green budgeting to evolve as a dynamic self-assessment mechanism. As central/ federal/ state/ province/ city ministries and departments become more aware of specific environmental priorities, additional dimensions such as international commitments, state climate action plans, biodiversity obligations, and environmental risk, the model can be progressively integrated. For example, linking schemes to the SDGs enables outcome-based monitoring when connected to SDG indicator systems. Thematic mapping strengthens alignment with local environmental needs, while activity mapping ensures that an appropriate mix of policy instruments ranging from programme implementation to technology deployment and public outreach is applied.
A participatory process is essential when determining the dimensions and objectives of green budgeting, supported by consistent stakeholder sensitisation. Over time, the exercise should be enhanced through independent peer review and on-ground impact assessments to ensure credibility, effectiveness and continuous improvement. The Green Budgeting portal[29] has resources on green budgeting including an open access toolkit[30] .
Types of budgets
Sales budget – an estimate of future sales, often broken down into both units. It is used to create company and sales goals.
Production budget – an estimate of the number of units that must be manufactured to meet the sales goals. The production budget also estimates the various costs involved with manufacturing those units, including labor and material. Created by product oriented companies.
Capital budget – used to determine whether an organization's long-term investments such as new machinery, replacement machinery, new plants, new products, and research development projects are worth pursuing.
Cash flow/cash budget – a prediction of future cash receipts and expenditures for a particular time period. It usually covers a period in the short-term future. The cash flow budget helps the business to determine when income will be sufficient to cover expenses and when the company will need to seek outside financing.
Conditional budgeting is a budgeting approach designed for companies with fluctuating income, high fixed costs, or income depending on sunk costs, as well as NPOs and NGOs.
Marketing budget – an estimate of the funds needed for promotion, advertising, and public relations in order to market the product or service.
Project budget – a prediction of the costs associated with a particular company project. These costs include labour, materials, and other related expenses. The project budget is often broken down into specific tasks, with task budgets assigned to each. A cost estimate is used to establish a project budget.
Revenue budget – consists of revenue receipts of government and the expenditure met from these revenues. Revenues are made up of taxes and other duties that the government levies. Various countries and unions have created four types of tax jurisdictions: interstate, state, local and tax jurisdictions with a special status (Free-trade zones). Each of them provides a money flow to the corresponding revenue budget levels.[31][32]
Expenditure budget – includes spending data items.
Flexibility budget – it is established for fixed cost and variable rate is determined per activity measure for variable cost.
Appropriation budget – a maximum amount is established for certain expenditure based on management judgement.
Performance budget – it is mostly used by organization and ministries involved in the development activities. This process of budget takes into account the end results.
Zero based budget – A budget type where every item added to the budget needs approval and no items are carried forward from the prior years budget. This type of budget has a clear advantage when the limited resources are to be allocated carefully and objectively. Zero based budgeting takes more time to create as all pieces of the budget need to be reviewed by management.[33]
Personal budget – A budget type focusing on expenses for self or for home, usually involves an income to budget.
↑Kovalko, Nataliia (2019). "Special aspects of legal status of state authorities that perform public financial activity (key challenges and the ways to address them)". PUBLIC FINANCE: LEGAL ASPECTS: Collective monograph. Yevhen Marynchak. pp.95–117. ISBN978-9934-571-82-4. HALhal-02188891.
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