The Union Cabinet on Tuesday approved Rs 10,000 crore for the SME Growth Fund to provide equity investments. This initiative aims to help small and medium businesses expand and adopt new technology. By targeting manufacturing and services, the fund will support growth in Tier II and Tier III cities too.
The SME Growth Fund aims to provide long-term growth capital and address financing gaps for these businesses. By targeting manufacturing and services sectors, the initiative will facilitate expansion and enhance competitiveness. Strategic investments in Tier II and Tier III cities will foster balanced regional development as well.
The Union Cabinet, on Tuesday, approved the government's commitment of Rs 10,000 crore towards the establishment of the SME Growth Fund (SGF) aimed at catalysing growth-oriented capital for India's Small and Medium Enterprises (SMEs) and enabling the emergence of champion Indian enterprises across manufacturing, services, technology, innovation-driven sectors, and strategic value chains. Union Minister Nirmala Sitharaman announced it during Union Budget 2026-27 as part of the initiatives strengthening the MSME sector.
There are existing funds which provide equity support but majority of them focus on early-stage enterprises and cover majorly Micro enterprises.
SMEs constitute the backbone of the Indian economy, contributing significantly to employment generation, exports, manufacturing output, and innovation. While various initiatives have enhanced access to credit for SMEs, a gap remains in the availability of long-term risk capital required by enterprises seeking to scale, innovate, expand internationally, adopt advanced technologies, undertake acquisitions, and transform into industry leaders. The SME Growth Fund is designed to address this critical financing gap by providing patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability.
The Fund is envisioned as a transformational instrument to support enterprises at critical inflection points in their growth journey. Majority allocation from SGF will be made towards small and medium manufacturing focused enterprises. Fund will also consider SME's operating in industrial clusters in Tier II and Tier III cities.
By providing long-term capital, the initiative will enable Indian SMEs to scale operations, invest in technology and manufacturing capacity, expand into international markets, integrate into global value chains, and undertake strategic investments. The Government expects the Fund to accelerate the emergence of a strong pipeline of Indian companies with the scale, innovation capability, 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 the Alternative Investment Fund (AIF) established under the SGF framework. By enabling manufacturing enterprises to expand capacity, adopt advanced technologies and achieve greater scale, the SGF is expected to improve scale, productivity, and strengthen export competitiveness. Investments across industrial clusters, including those in Tier-II and Tier-III cities, will support balanced regional industrial development, reinforce local supply chains and generate high-quality employment opportunities.