The Cabinet on Tuesday approved ₹10,000 crore to establish the SME Growth Fund. This fund aims to help small and medium enterprises scale their operations and innovate. Minister Ashwini Vaishnaw said, "The SGF is designed to address this critical financing gap by providing patient growth equity capital to high-potential SMEs."
The Cabinet on Tuesday has approved ₹10,000 crore towards the establishment of the SME Growth Fund (SGF) aimed at catalysing growth-orientated capital for India's small and medium enterprises (SMEs) and enabling the emergence of champion Indian enterprises.
These are across manufacturing, services, technology, innovation-driven sectors, and strategic value chains as per Budget 2026-27. This was part of the holistic set of announcements that were made in the Budget, focusing on providing equity, liquidity and professional support for the MSME ecosystem as a whole.
There are existing funds which provide equity support, but the majority of them focus on early-stage enterprises and cover majorly microenterprises. A structural gap exists for equity growth capital for SMEs, Ashwini Vaishnaw, Minister for Electronics and Information Technology, said.
SMEs in the Indian Economy
He said 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 SGF is designed to address this critical financing gap by providing patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability," Vaishnaw said.
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. The fund will also consider SMEs operating in industrial clusters in tier-II and tier-III cities.
Long-term capital
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.
The government's commitment to the SGF complements its ongoing efforts to strengthen the SME sector through reforms, digitalisation initiatives, credit support mechanisms, ease of doing business measures, public procurement reforms, start-up promotion initiatives, and production-linked incentive programmes, the government release said.