New Delhi: 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 (SGF) to provide direct equity investments to small and medium enterprises (SMEs).
The initiative, announced under the Union Budget 2026-27, aims to bridge the gap in growth-stage equity capital for SMEs and support the emergence of Indian companies capable of competing globally.
According to the government, existing equity funds largely focus on early-stage and micro enterprises, leaving a structural gap in long-term risk capital for small and medium businesses seeking to scale up.
Under the SGF framework, the government will provide an aggregate ₹10,000 crore commitment to an Alternative Investment Fund (AIF). The fund will provide patient growth equity to high-potential SMEs with demonstrated business viability and scalability.
A majority of the fund allocation will be directed towards small and medium manufacturing enterprises. The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
The initiative is aimed at helping enterprises expand manufacturing capacity, adopt advanced technologies, enter international markets, integrate into global value chains and undertake strategic investments, the government said.
The government expects the fund to strengthen the pipeline of Indian companies capable of becoming sectoral leaders while improving productivity and export competitiveness.
The SGF will complement existing government measures for the SME sector, including credit support, digitalisation, ease-of-doing-business reforms, public procurement initiatives, startup promotion and production-linked incentive programmes.
The government said investments in industrial clusters, particularly in Tier-II and Tier-III cities, would support regional industrial development, strengthen local supply chains and create quality employment.
The initiative is part of the government’s broader objective of building an entrepreneurship ecosystem and advancing the vision of Viksit Bharat @ 2047.
