THEBUSINESSBYTES
BUREAU
NEW
DELHI, OCTOBER 6, 2026
The Union Cabinet on
Tuesday approved the government's commitment of Rs 10,000 crore towards setting
up an SME Growth Fund (SGF) to provide long-term growth capital to small and
medium enterprises and help create a new generation of Indian business
champions.
The decision, taken
at a Cabinet meeting chaired by Prime Minister Narendra Modi, is in line with
the announcement made in the Union Budget 2026-27 to bridge the structural gap
in growth-stage equity funding for small and medium enterprises.
The proposed fund
will provide direct equity investments in high-potential SMEs with proven
business viability and scalability, particularly those looking to expand
capacity, adopt advanced technologies, enter global markets, undertake
acquisitions or integrate into international value chains.
Unlike existing
equity-support funds that largely cater to early-stage ventures and micro
enterprises, the SME Growth Fund is aimed at addressing the shortage of
patient, long-term risk capital available to growing small and medium
businesses.
Under the initiative,
the government will make an aggregate commitment of Rs 10,000 crore to an
Alternative Investment Fund (AIF) established under the SGF framework.
A majority of the
fund's allocation will be directed towards small and medium
manufacturing-focused enterprises. The fund will also consider businesses
operating in industrial clusters in Tier-II and Tier-III cities, with the
objective of promoting balanced regional industrial development and
strengthening local supply chains.
The government
expects the initiative to enable SMEs to scale operations, enhance
productivity, invest in technology and manufacturing capabilities, expand
internationally and undertake strategic investments.
The fund is also
expected to strengthen the pipeline of Indian enterprises with the scale,
innovation capabilities and competitiveness needed to emerge as leaders in
their respective sectors.
SMEs form a critical
part of India's economic landscape, contributing significantly to employment,
exports, manufacturing output and innovation. While successive government
measures have improved access to institutional credit, businesses at the growth
stage often face constraints in securing long-term equity capital needed for
expansion and transformation.
The SGF seeks to fill
this financing gap by providing patient growth equity to enterprises at
critical inflection points in their business journey.
The initiative is
expected to have a particular impact on manufacturing enterprises by enabling
them to expand production capacity, adopt advanced technologies and achieve
economies of scale, thereby improving productivity and export competitiveness.
Investments in
industrial clusters, including those located in smaller cities, are also
expected to generate quality employment, strengthen regional manufacturing
ecosystems and reinforce domestic supply chains.
The Rs 10,000-crore
commitment complements the government's broader measures for strengthening the
SME ecosystem, including credit-support mechanisms, digitalisation,
ease-of-doing-business reforms, public procurement initiatives, startup
promotion measures and production-linked incentive programmes.
The government said the initiative would strengthen India's entrepreneurship ecosystem and deepen the domestic capital market for growth-stage enterprises.
The SME Growth Fund is also positioned as an important instrument towards the government's vision of Viksit Bharat @ 2047, by fostering innovation-led industrialisation and supporting the emergence of globally competitive Indian enterprises.
