The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a government commitment of Rs 10,000 crore for setting up the SME Growth Fund
(SGF), a major push aimed at giving small and medium enterprises access to long-term equity capital. The initiative, announced as part of the Union Budget 2026-27, seeks to address a funding gap faced by growth-stage SMEs that require equity rather than conventional debt to expand operations, invest in technology, enter overseas markets and build larger businesses. The government expects the fund to help create a pipeline of Indian companies with the scale and competitiveness needed to emerge as global players, supporting the broader Viksit Bharat @ 2047 vision. While several government-backed funds already provide equity support to businesses, their focus has largely been on early-stage ventures, particularly micro enterprises. This has left a gap in the availability of growth capital for businesses that have already established viable operations but need substantial funding to scale. The SME Growth Fund is intended to bridge this gap by providing patient, long-term equity capital to businesses with proven models and the potential for further expansion. SMEs play a crucial role in India's economy, contributing to employment, exports, manufacturing and innovation. However, businesses looking to expand often require significant risk capital for capacity addition, technology upgrades, international expansion, acquisitions and other strategic investments. Manufacturing SMEs To Get Major Focus A substantial portion of the SGF allocation will be directed towards small and medium-sized manufacturing enterprises. The fund will also look at businesses operating from industrial clusters in Tier-II and Tier-III cities, potentially giving regional enterprises greater access to growth capital. The government's focus on manufacturing will help Indian businesses increase production capacity, improve productivity and adopt advanced technologies. Greater investment in these enterprises could also help strengthen domestic supply chains and improve India's competitiveness in global markets. By supporting businesses outside major urban centres, the initiative is also expected to encourage more balanced industrial development and create employment opportunities in smaller cities. How SMEs Could Benefit From The Fund The Rs 10,000 crore commitment will be provided by the Government of India to an Alternative Investment Fund (AIF) established under the SGF framework. The fund is expected to support companies at crucial stages of their expansion by providing capital that can be deployed over a longer period. This could allow eligible SMEs to increase capacity, modernise manufacturing facilities, adopt new technologies and explore international markets without relying solely on traditional borrowing. The government also expects the initiative to help Indian enterprises integrate more deeply into global value chains and undertake strategic investments that can improve their size and competitiveness. Boost For India's Next Generation Of Companies The SME Growth Fund is part of a wider policy push covering equity access, liquidity and professional support for the MSME ecosystem. The government has also been pursuing measures related to digitalisation, credit availability, ease of doing business, public procurement, startup development and production-linked incentives. Against this backdrop, the SGF is designed to complement existing credit-focused measures by addressing the need for risk-bearing growth capital. The government believes the initiative can accelerate the emergence of a stronger group of Indian enterprises capable of competing internationally. Investments in high-growth SMEs could support innovation, industrial expansion and higher-quality job creation.
