New Delhi: The Union Cabinet on Tuesday approved the Government of India’s commitment of Rs 10,000 crore to set up the SME Growth Fund (SGF). Prime Minister Narendra Modi chaired the meeting. The fund aims to catalyse growth-oriented capital for Small and Medium Enterprises (SMEs). It will help champion Indian enterprises emerge across manufacturing, services, technology, innovation-driven sectors and strategic value chains.
The move follows Para 28 of Union Budget 2026-27. It is part of a holistic set of Budget announcements that focus on equity, liquidity and professional support for the MSME ecosystem as a whole.
Existing funds provide equity support, but most focus on early-stage enterprises and mainly cover Micro enterprises. A structural gap exists in equity growth capital for Small and Medium Enterprises. The government said SMEs form the backbone of the Indian economy and contribute significantly to employment, exports, manufacturing output and innovation.
Various initiatives have improved SMEs’ access to credit. A gap remains, however, in long-term risk capital for enterprises that want to scale, innovate, expand internationally, adopt advanced technologies, make acquisitions and become industry leaders. The SME Growth Fund is designed to fill this gap. It will offer patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability.
The government said the initiative reflects its commitment to the vision of Viksit Bharat 2047. It aims to strengthen India’s entrepreneurship ecosystem and deepen the domestic capital market for growth-stage enterprises. It also seeks to create a new generation of Indian companies able to compete globally.
SME Growth Fund to prioritise manufacturing enterprises
The Fund is envisioned as a transformational instrument to support enterprises at critical inflection points in their growth journey. Most of the SGF allocation will go to small and medium manufacturing-focused enterprises. The Fund will also consider SMEs operating in industrial clusters in Tier II and Tier III cities.
Under the initiative, the Government of India will provide an aggregate commitment of Rs 10,000 crore to the Alternative Investment Fund (AIF) established under the SGF framework. The government expects the SGF to help manufacturing enterprises expand capacity, adopt advanced technologies and achieve greater scale. It is also expected to improve productivity and strengthen export competitiveness.
Investments across industrial clusters, including those in Tier-II and Tier-III cities, will support balanced regional industrial development. They will also reinforce local supply chains and generate high-quality employment opportunities.
Long-term capital will enable SMEs to scale operations, invest in technology and manufacturing capacity, and expand into international markets. They can also integrate into global value chains and make strategic investments. The government expects the SME Growth Fund to build a strong pipeline of Indian companies with the scale, innovation capability and competitiveness to become champions in their sectors.
The commitment complements the government’s ongoing efforts to strengthen the SME sector. These include reforms, digitalisation initiatives, credit support mechanisms, ease of doing business measures, public procurement reforms, startup promotion initiatives and production-linked incentive programmes.
The government said it reaffirms its commitment to empowering India’s entrepreneurs and fostering a new generation of competitive enterprises. By catalysing investment in high-growth SMEs, the Fund will help create champions, drive innovation-led industrialisation and generate quality employment across the country. It will serve as a key pillar in advancing the vision of Viksit Bharat 2047.
