Role of Micro Budgeting in Indian Economy

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Micro finance is an emerging concept which plays a vital role in the development of low income groups. It acts as building block of our economy. It saves people from the inflating rate of interest. It also has certain shortcomings which must not be overlooked in a developing country like India. 

India's annual budget is first a macroeconomic exercise and then a micro one catering to sectors of the economy. Micro budgeting is considered as traditional budget. Micro budgets are a great tools but there are certain flaws in them as mentioned hereunder -

In order to do this, one has to spend time looking carefully at spending, dividing into small categories and coming up with realistic targets. This have to be done every month over and over again which adds up to quite a lot of time. Second, it can be pretty inflexible. An unexpected expense can wreck a micro budget making one has to feel like a failure at the end of month. There are life events which one cannot simply control, and micro budgets rarely "flex" enough to handle those unexpected events. 

The purpose of micro budgeting is to teach practical frugality. The entire purpose of a micro budget is to look deeply how money is spent, identify ways in which one could spend less, and then put those methods into practice. Then one can figure out which frugal tactics really work and which one does not. Micro budgeting allows to get finances in order and instill habits that become part of everyday life.  

If one is struggling to figure out where money is going, one should try micro budgeting for a few months and see what is discovered. If normal routines are causing to spend less than one earns, then switch to macro budgeting to use the saved time wisely. One can always switch between the two when needed.  

 In the light of above, following best budget practices suggested suitable to Indian economy - 

- Link budget development to Corporate strategy.

- Design procedures that allocates resources strategically.

- Link cost management efforts to budgeting.

- Tie incentives to performance measures other than meeting budget targets.

- Develop budgets that accommodate change.

- Reduce budget complexity and and cycle time. 


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