Cabinet Clears 10,000 Crore SME Growth Fund Commitment

The Union Cabinet approves a ₹10,000 crore SME Growth Fund to provide long-term equity capital to growth-stage SMEs, with a focus on manufacturing, technology adoption, global expansion and integration into global value chains.

The Union Cabinet has approved a ₹10,000 crore commitment towards establishing the SME Growth Fund (SGF), aimed at providing long-term equity capital to small and medium enterprises (SMEs) and helping them expand into globally competitive businesses. The decision was taken under the chairmanship of Prime Minister Narendra Modi.

The fund will be established as an Alternative Investment Fund (AIF) and will make direct equity investments in eligible SMEs. It was announced in the Union Budget 2026-27 as part of the government's measures to strengthen the MSME ecosystem through improved access to equity, liquidity and professional support.

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The SME Growth Fund is intended to address a financing gap faced by growth-stage enterprises. While existing equity-support programmes primarily serve micro enterprises and early-stage businesses, the new fund will target companies with demonstrated viability and scalability that require additional capital to expand operations.

The fund will support enterprises seeking to increase manufacturing capacity, adopt advanced technologies, undertake strategic acquisitions, enter international markets and integrate into global value chains. A majority of the allocation will be directed towards manufacturing-focused SMEs, while enterprises operating in industrial clusters in Tier-II and Tier-III cities will also be considered.

The initiative will cover businesses across manufacturing, services, technology, innovation-driven sectors and strategic value chains. By providing patient, long-term growth equity, the government expects the fund to support enterprises at critical stages of expansion and help them strengthen productivity, innovation and international competitiveness.

The fund forms part of the broader “Creating Champion MSMEs” strategy announced in the Union Budget. The government has also introduced measures to improve liquidity for MSMEs, including initiatives involving the Trade Receivables Discounting System (TReDS), credit guarantee support and greater access to financing against receivables.

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According to government data cited in the Budget measures, MSMEs account for 35.4% of India's manufacturing output, 48.58% of exports and 31.1% of GDP, with more than 7.47 crore enterprises employing over 32.82 crore people. The government has allocated ₹24,566.27 crore to the Ministry of Micro, Small and Medium Enterprises for 2026-27.

The SME Growth Fund is expected to complement existing credit, equity and technology support programmes by improving access to risk capital for enterprises with expansion potential. The government said the initiative is intended to strengthen domestic supply chains, encourage innovation and support the emergence of Indian companies capable of competing in international markets.