Classroom: Govt Expenditure

Orbis Economics
The basic aim of the annual budget presented in February end every year by the government at the centre is to announce the expenditure it is planning in the next year i.e. for the year starting April 1 and ending next March 31. The budget can thus provide important clues to Small and Medium Enterprises (SMEs) about the kind of government support available, so that they can avail of schemes for SMEs, plan for new opportunities and make their business plans for the next year accordingly.
In this part of our series on the government economic numbers that can impact SMEs we take a closer look at what expenditure SMEs should look out for. 
What is the most important government expenditure head for SMEs?
The finance minister’s budget speech typically has a section on ‘Micro, Small and Medium Enterprises’, which lists government allocation specifically for this sector. For instance, last year’s budget mentioned three points that provided direct and indirect funding support to the SME sector. It announced a venture capital fund with a corpus of Rs 5,000 crore, a new avenue of finance for entrepreneurs. It also approved a policy for government and public sector companies to make a minimum 20 per cent of their purchases from SMEs. And it launched a new SME index on the two stock exchanges, to allow focused access to finance through the secondary market.
What sector-wise expenditure is significant for SMEs?
While the budget speech does not always refer to specific industry sectors, it usually talks about broad heads like industry and agriculture, and mentions exports and imports as well. If there are sector-specific announcements, so much the better, but these references should be viewed along with broader expenditure announcements.
For instance, if you are an SME producing auto parts, watch out for announcements pertaining to the National Manufacturing Policy (as was the case last year). This year, with the economy slowing down, the budget for 2013-14 may look at reviving the industrial and exports sectors.
How can SMEs spot new opportunities in the budget?
The budget usually encourages production in sectors that can support economically vulnerable sections. These are areas that are economically less developed or are in trouble. It also promotes new sectors that encourage development. For instance, last year’s budget made several announcements for the textiles sector, which is a big employer in the country and covers a number of small craftspersons. Similarly, it talked about training youth in Jammu & Kashmir, a potential opportunity for SMEs in and around the state, to tap a newly skilled workforce.
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