New Delhi, Oct 6 : The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved the government’s commitment of Rs 10,000 crore towards establishing the SME Growth Fund (SGF) to provide direct equity investments to small and medium enterprises (SMEs).
The initiative, announced under Para 28 of the Union Budget 2026-27, aims to provide growth-oriented capital to SMEs and support the emergence of Indian enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains.
The government said the initiative addresses a structural gap in the availability of equity growth capital for SMEs, as existing funds largely focus on early-stage enterprises and predominantly cover micro enterprises.
Under the scheme, the government will provide an aggregate commitment of Rs 10,000 crore to an Alternative Investment Fund (AIF) established under the SGF framework.
The fund is designed to provide patient, long-term growth equity to high-potential SMEs with demonstrated business viability and scalability. A majority of the allocation will be directed towards small and medium manufacturing enterprises, while SMEs operating in industrial clusters in Tier-II and Tier-III cities will also be considered.
The government said the fund will enable enterprises to scale operations, invest in advanced technologies and manufacturing capacity, expand into international markets, integrate with global value chains and undertake strategic investments.
The initiative is also expected to improve productivity and export competitiveness while supporting balanced regional industrial development, strengthening local supply chains and generating employment opportunities.
The government said SMEs constitute a significant part of India’s economy, contributing to employment generation, exports, manufacturing output and innovation. While several measures have improved access to credit, a gap remains in long-term risk capital required by enterprises seeking to scale, innovate and expand.
The SME Growth Fund will complement ongoing government measures for strengthening the SME sector, including 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 the initiative is aimed at strengthening India’s entrepreneurship ecosystem, deepening the domestic capital market for growth-stage enterprises and creating a new generation of Indian companies capable of competing globally.
It added that the fund will serve as a key pillar in advancing the vision of Viksit Bharat @ 2047 by promoting innovation-led industrialisation and creating quality employment opportunities.(KNS)
