The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved a government commitment of ₹10,000 crore towards establishing the SME Growth Fund to provide direct equity investments in small and medium enterprises and help them grow into globally competitive companies.
Announced in the Union Budget 2026–27, the fund aims to mobilise growth-oriented capital for enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains. It forms part of a broader package of Budget measures providing equity, liquidity and professional support to the MSME ecosystem.
The government will provide an aggregate commitment of ₹10,000 crore to an Alternative Investment Fund established under the SME Growth Fund framework.
The initiative seeks to address a structural gap in equity financing for growth-stage small and medium enterprises. Existing equity-support funds largely focus on early-stage businesses and micro enterprises, while SMEs seeking to expand need greater access to long-term risk capital, the government said.
The fund will provide patient, long-term growth equity to high-potential businesses with demonstrated viability and scalability. It is intended to support enterprises at critical stages as they scale operations, innovate, adopt advanced technologies, undertake acquisitions and expand internationally.
The majority of the fund’s allocation will go towards manufacturing-focused small and medium enterprises. It will also consider businesses operating in industrial clusters in Tier-II and Tier-III cities.
The government expects the investments to help enterprises expand manufacturing capacity, improve productivity, enter international markets, integrate into global value chains and undertake strategic investments. The aim is to develop a pipeline of Indian companies with the scale, innovation capabilities and competitiveness to become leaders in their sectors.
Investments in industrial clusters, including those in smaller cities, are expected to support balanced regional industrial development, strengthen local supply chains and generate high-quality employment.
The government said SMEs contribute significantly to employment, exports, manufacturing output and innovation. While measures to improve access to credit have supported the sector, the availability of long-term capital remains a constraint for businesses seeking to grow.
The fund will complement existing reforms, digitalisation initiatives, credit support, ease-of-doing-business measures, public procurement reforms, startup promotion and production-linked incentive programmes.
The initiative is intended to strengthen entrepreneurship, deepen the domestic capital market for growth-stage enterprises and support innovation-led industrialisation in line with the vision of Viksit Bharat 2047.
