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 the establishment of the SME Growth Fund (SGF) to provide direct equity investments to small and medium enterprises (SMEs) and help create a new generation of Indian companies capable of competing globally.
The initiative is part of the measures announced in the Union Budget 2026-27 to provide equity, liquidity and professional support to the MSME ecosystem.
The government said existing funds provide equity support to enterprises, but most focus on early-stage businesses and largely cover micro enterprises. A structural gap, it said, remains in the availability of growth-stage equity capital for small and medium enterprises.
The SGF is aimed at catalysing growth-oriented capital for SMEs across manufacturing, services, technology, innovation-driven sectors and strategic value chains.
The government said the initiative would address the financing gap faced by viable SMEs seeking to scale operations, innovate, expand internationally, adopt advanced technologies, undertake acquisitions and emerge as industry leaders.
The fund will provide “patient growth equity capital” to high-potential SMEs with demonstrated business viability and scalability.
A majority of the fund’s allocation will be directed towards small and medium manufacturing-focused enterprises. It will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
By providing long-term capital, the initiative is expected to help Indian SMEs expand capacity, adopt advanced technologies, enter international markets, integrate into global value chains and undertake strategic investments.
The government said the fund would help create a strong pipeline of Indian companies with the scale, innovation capabilities and competitiveness required to become champions in their respective sectors.
Under the initiative, the Government of India will provide an aggregate commitment of Rs 10,000 crore to an Alternative Investment Fund (AIF) established under the SGF framework.
The government said the fund would complement existing measures to strengthen the SME sector, including digitalisation initiatives, credit support mechanisms, ease of doing business reforms, public procurement reforms, startup promotion initiatives and production-linked incentive programmes.
The SGF is also expected to support balanced regional industrial development by investing in industrial clusters, including those in Tier-II and Tier-III cities. Such investments, the government said, would strengthen local supply chains and generate quality employment opportunities.
The initiative is part of the government’s broader effort to strengthen India’s entrepreneurship ecosystem, deepen the domestic capital market for growth-stage enterprises and advance the vision of Viksit Bharat @2047.
