The country had a lot of expectations from Budget 2013 for two main reasons - because it was presented by Mr. Chidambaram and also because it is one year before the general elections in the country. Revival of growth in the SME sector and brining about SME friendly policies were important expectations.
Although there was nothing explicitly negative for SMEs, there were no definite proposals to spur growth for this sector. Some of the major policies in relation to this sector are:

Continuation of benefits to MSMEs: It has been announced that the benefits or preferences enjoyed by Micro, Small and Medium Enterprises will stay with them for upto three years after they grow out of the category in which they obtained the benefit. Non-tax benefits have been proposed, which may be made available to a MSME unit for three years after it graduates to a higher category.

Refinancing capability of SIDBI: SMEs rely a lot on SIDBI for financing. It has been proposed to enhance the refinancing capability of SIDBI from the current level of Rs.5000 crores to Rs. 10,000 crores per year. Further, micro-finance institutions have also been encouraged by increasing allocation to SIDBI for this purpose. SMEs also resort to factoring services by SIDBI. A corpus of Rs. 500 crore has been granted to SIDBI for this purpose.

Technology and mentoring initiatives encouraged: SMEs are in constant need of technology awareness and mentoring. It has been proposed in the Budget to allocate Rs. 2000 crores in the 12th Plan to set up additional technology development centres to provide support to small businesses.  SMEs can also expect better mentoring, as funds provided to technology incubators will qualify as Corporate Social Responsibility expenditure.

Textiles-related SMEs: The Finance Minister has brought about a number of schemes and increased fund allocation for the textile sector. Handloom weavers will be given loans at concessional rates of 6%. As a majority of companies in this sector are SMEs, increased focus will help in the growth of these SMEs.

Agri-related SMEs: The Finance Minister has given importance to agriculture in this Budget and has increased the fund outlay to this sector and to the Ministry of Agriculture. Extension of the interest subvention scheme, where farmers will get access to loans at 4% has been extended to private banks as well. There are also a host of agricultural schemes and policies announced in the Budget, which will positively impact this sector. As a result, SMEs related to agriculture and food processing will stand to benefit, on the back of increased spend and farmer-friendly policies.

Infrastructure-related SMEs: Infrastructure spend has been stressed, with encouragement given to Infrastructure Debt funds and ease in tapping bond markets. The reforms bode well for infrastructure-related SMEs, which supply inputs to this sector.

Manufacturing-related SMEs: The Finance Minister has acknowledged that several projects are stalled and implementation is delayed due to regulatory hurdles. The Cabinet Committee on Investment (CCI) has been set up to monitor investment proposals, which will hopefully quicken project implementation. SMEs servicing project-based industries like coal, power and oil & gas can face shortening of working capital cycles. Further, companies investing Rs.100 crore or more in plant and machinery during the period 1.4.2013 to 31.3.2015 will be entitled to deduct an investment allowance of 15% of the investment, in addition to the current rates of depreciation. This will definitely have a positive effect on SMEs, servicing such companies.

Electronics sector: The Finance Minister has promised appropriate incentives to semiconductor wafer fab manufacturing facilities, including zero customs duty for plant and machinery, in order to encourage manufacture of electronics in India. This will help in the growth of SMEs which provide raw materials to the electronics sector.

Capital markets initiatives: One of the main challenges for SMEs is to raise funds. This year, in addition to normal Initial Public Offerings (IPOs) by SMEs on the SME exchange, the Budget has allowed SMEs, including start-ups to list on the SME exchange without being required to make an IPO, with the issue being restricted to informed investors. This in turn will make the process faster for small companies.

Tax policies: The Finance Minister has increased surcharge from 5% to 10% for companies whose taxable income exceeds Rs.10 cr for the financial year 2013-14. There has been no change in normal customs duty of 10% for non-agricultural goods, normal excise duty of 12% and normal service tax of 12%. Some sectors like leather and gems and precious stones have benefited by a fall in customs duties. Zero excise duty has been granted for cotton and manmade sector, and handmade carpets have been exempt from excise duty. The Finance Minister has reiterated that the Government has a serious intent of introducing GST.

Throughout the Budget, the Finance Minister has stressed the need for growth and setting up an investor-friendly economy by bringing about clear and lucid policies. This will send out a positive signal to both domestic and foreign investors, which can increase inflows and investment into the economy. SMEs - the backbone of the economy should stand to benefit both directly and indirectly by this.