New Delhi: The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a ₹10,000-crore government commitment towards establishing the SME Growth Fund (SGF) to provide growth capital to small and medium enterprises (SMEs).
The initiative, announced in Para 28 of the Union Budget 2026-27, is intended to address the shortage of long-term equity capital available to SMEs seeking to expand, adopt new technologies, increase manufacturing capacity and enter international markets.
Fund to Provide Equity Support to Growth-Stage SMEs
Under the approved framework, the Government of India will make an aggregate commitment of ₹10,000 crore to an Alternative Investment Fund (AIF) established under the SGF framework.
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The fund is designed to provide patient, long-term equity capital to SMEs that have demonstrated business viability and the potential to scale.
The government said existing equity-support mechanisms largely focus on early-stage enterprises and micro enterprises, leaving a gap in growth-stage equity financing for small and medium businesses.
Manufacturing SMEs to Get Majority Allocation
A majority of the SGF allocation will be directed towards small and medium manufacturing enterprises, according to the Cabinet decision.
The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
The government expects investments through the fund to help eligible enterprises expand their operations, increase manufacturing capacity, adopt advanced technologies and participate more extensively in global value chains.
Fund Targets Technology, Exports and Global Expansion
The SGF will support SMEs at key stages of their growth, including expansion into international markets, technology adoption, acquisitions and other strategic investments.
According to the government, long-term equity capital can help enterprises scale their businesses and strengthen their productivity and export competitiveness.
Focus on Industrial Clusters and Employment
The government said the fund’s focus on industrial clusters, including those in Tier-II and Tier-III cities, is intended to support regional industrial development and strengthen local supply chains.
The initiative is also expected to contribute to employment generation by enabling SMEs to expand their operations and invest in manufacturing and technology.
Part of Broader MSME Support Measures
The SME Growth Fund is part of a wider set of measures announced in the Union Budget 2026-27 covering equity, liquidity and professional support for the MSME ecosystem.
The government said the initiative complements existing measures related to credit support, digitalisation, ease of doing business, public procurement, startup promotion and production-linked incentive programmes.
The Cabinet described the SGF as part of the government’s broader effort to strengthen India’s entrepreneurship ecosystem and support the emergence of Indian enterprises capable of competing globally.
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