New Delhi, October 6:The Union Cabinet, chaired by Prime Minister Narendra Modi, on Tuesday approved the Government of India’s commitment of Rs 10,000 crore towards the establishment of the SME Growth Fund (SGF) to provide growth-oriented equity capital to India’s small and medium enterprises (SMEs).

The initiative, announced as part of theUnion Budget 2026-27, is aimed at supporting the emergence of globally competitive Indian enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains.

The decision is part of a broader set of measures announced in the Budget to strengthen the MSME ecosystem by improving access to equity, liquidity and professional support.

At present, several funds provide equity support to enterprises, but most are focused on early-stage businesses and predominantly cater to micro enterprises. The government has identified a structural gap in the availability of growth-stage equity capital for small and medium enterprises.

The SME Growth Fund is designed to bridge this gap by providing patient, long-term capital to high-potential SMEs with proven business models and the ability to scale. The initiative is expected to support companies seeking to expand operations, invest in advanced technologies, increase manufacturing capacity, enter international markets, integrate with global value chains and undertake strategic acquisitions.

The Fund is envisioned as a transformational financing instrument for enterprises at critical stages of their growth journey. A majority of the allocation will be directed towards small and medium manufacturing enterprises. SMEs operating in industrial clusters, including those located in Tier-II and Tier-III cities, will also be considered for support.

Under the initiative, the government will make an aggregate commitment of Rs 10,000 crore to anAlternative Investment Fund (AIF)established under the SGF framework.

The government expects the Fund to help Indian SMEs achieve greater scale, improve productivity and strengthen their competitiveness in export markets. Investments in industrial clusters across Tier-II and Tier-III cities are also expected to promote balanced regional industrial development, strengthen local supply chains and create quality employment opportunities.

The initiative assumes significance given the critical role played by SMEs in India's economy. They contribute substantially to employment generation, exports, manufacturing output and innovation. While several government measures have improved access to credit, the availability of long-term risk capital remains a challenge for enterprises seeking to scale up and become industry leaders.

The SME Growth Fund will complement existing government measures for strengthening the SME sector, including credit support programmes, digitalisation initiatives, ease-of-doing-business reforms, public procurement measures, startup promotion schemes and production-linked incentive programmes.

The government said the initiative reflects its commitment to realising the vision ofViksit Bharat @ 2047by strengthening India’s entrepreneurship ecosystem, deepening domestic capital markets for growth-stage enterprises and creating a new generation of Indian companies capable of competing globally.

By catalysing investments in high-growth SMEs, the Fund is expected to promote innovation-led industrialisation, expand manufacturing capabilities, strengthen global competitiveness and generate quality employment opportunities across the country.