The Union Cabinet on October 6, 2026, approved a Rs.10,000 crore government commitment towards the SME Growth Fund (SGF), aimed at providing direct equity investment to small and medium enterprises and helping them scale into competitive Indian businesses.
The decision was taken by the Union Cabinet chaired by Prime Minister Narendra Modi. The initiative was announced as part of the Union Budget 2026-27 and is intended to address the shortage of growth-stage equity capital available to small and medium enterprises.
SME Growth Fund to target growth-stage businesses
According to the Press Information Bureau (PIB), existing equity-support funds largely focus on early-stage businesses and primarily cover micro enterprises. The government said a structural gap remains for equity capital needed by small and medium enterprises during their expansion phase.
Under the SME Growth Fund, the government will provide an aggregate Rs.10,000 crore commitment to an Alternative Investment Fund (AIF) established under the SGF framework. The fund will provide long-term equity capital to SMEs with demonstrated business viability and scalability.
The fund is expected to support businesses seeking to expand capacity, adopt advanced technologies, enter international markets, integrate into global value chains and undertake strategic investments.
Manufacturing SMEs to receive majority allocation
A majority of the SME Growth Fund’s allocation will be directed towards small and medium manufacturing-focused enterprises. The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
The government said investments in these clusters are intended to support regional industrial development, strengthen local supply chains and create quality employment opportunities.
The initiative will cover businesses across manufacturing, services, technology, innovation-driven sectors and strategic value chains. The government said the fund is designed to support the emergence of a pipeline of Indian companies capable of competing at the global level.
The SME Growth Fund complements existing government measures covering credit support, digitalisation, ease of doing business, public procurement, startup promotion and production-linked incentive programmes.
Q1. What is the SME Growth Fund? The SME Growth Fund is an initiative designed to provide long-term growth equity capital to small and medium enterprises.
Q2. How much has the government committed to the SME Growth Fund? The Government of India has committed an aggregate Rs.10,000 crore to the fund.
Q3. Which SMEs will the fund primarily target? A majority of the allocation will be made towards small and medium manufacturing-focused enterprises, while SMEs in industrial clusters in Tier-II and Tier-III cities will also be considered.
Q4. What will the SME Growth Fund help businesses do? The fund is intended to help SMEs expand operations, invest in technology and manufacturing capacity, enter international markets, integrate into global value chains and undertake strategic investments.
Q5. When was the SME Growth Fund approved? The Union Cabinet approved the Rs.10,000 crore commitment on October 6, 2026.
