There are three proposals in the union budget 2013-14 that stand out with respect to start ups and MSMEs.
Encouraging Micro, small and medium enterprises to grow
A well intended concession besides serving its purpose, also serves a counter interest, especially when it concerns the business and economy in general. MSMEs are given numerous concessions so that they set up, serve, survive and also grow. But the very threat of losing out on concessions if the MSME limit is breached is holding back many a small business. They develop a degree of contentment and choose to play safe. This is detrimental to investors (who are often owners of MSMEs) as well as economic interests. In order to help them grow and grow with some Government care, the finance minister has proposed that business would continue to enjoy MSME benefits up to three years after they grow out of the MSME category. This should help alleviate the fears of small businesses and enhance their risk appetite.
Funding the receivables
Finance minister has proposed in the union budget corpus of Rs.500 crore with SIDBI to set up a credit guarantee fund for factoring. Factoring is a credit mechanism for businesses to sell their receivables at a discount to the factoring agency, which would collect the receivables. The FM has also proposed to raise the refinancing capacity of SIDBI to Rs.10,000 crore.
A fillip to Incubators
Incubator facilities functioning within academic institutions and approved by Ministry of Science and technology or Ministry of MSME stand to gain from a budget proposal that allows funds contributed by corporate to them as deductible CSR initiative. The new companies bill obligates corporate to allocate 2% of net profit towards corporate social responsibility. This proposal should lead to more funding for innovative initiatives coming through incubators set up in academic institutions as companies can spend the amount in one go that too to foster innovation, which is meaningful too.
An opportunity for commercializing innovations
The FM has claimed to have identified few amazing Science and Technology innovations, with the help of Ministry of science and technology and the principal scientific advisor to the government. He has proposed a fund of Rs.200 crore to fund organizations that will scale up and take these products to the people. National innovation council to formulate a scheme for the management and application of this fund. Startups and MSMEs stand to benefit from this initiative as they can explore the possibilities of commercializing the innovations identified by the government.
Tool room and Technology development
The FM has stated that the centers setup by the ministry of micro, small and medium enterprise (MSME) for the tool rooms and technology development have been performing well in extending technology and design support to small business and will receive an additional sum of Rs. 2200 Crore with World Bank assistance, during the 12th plan period in order to setup 15 additional centers
Some of the other points in the budget, which include promoting skill development and rural development will also be very beneficial for the SME segment in moving forward. There is no doubt that the next round of growth will be led by SMEs. This has been vetted by the FM in the form of the various announcements to promote this segment.