Indian Economy News

Cabinet approves Commitment of US$ 1.06 billion towards establishment of the SME Growth Fund for direct equity investments in Small and Medium Enterprises to create future champions

The Union Cabinet, chaired by Mr. Narendra Modi, Prime Minister of India, has approved the Government of India’s commitment of Rs. 10,000 crore (US$ 1.06 billion) towards establishing the SME Growth Fund (SGF), aimed at providing growth-oriented capital to Small and Medium Enterprises (SMEs) and enabling the emergence of competitive Indian enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains. The initiative, announced in Union Budget 2026-27, seeks to address a structural gap in growth-stage equity financing for SMEs, as existing equity funds largely focus on early-stage enterprises and predominantly cover micro enterprises. The SGF will provide patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability, supporting enterprises seeking to scale operations, innovate, expand internationally, adopt advanced technologies, undertake acquisitions and strengthen their competitive position.

A majority of the SGF allocation will be directed towards small and medium manufacturing-focused enterprises, while SMEs operating in industrial clusters in Tier-II and Tier-III cities will also be considered. The Government of India will provide an aggregate commitment of Rs. 10,000 crore (US$ 1.06 billion) to the Alternative Investment Fund established under the SGF framework. By enabling enterprises to expand manufacturing capacity, adopt advanced technologies and achieve greater scale, the Fund is expected to improve productivity, strengthen export competitiveness and facilitate greater integration of Indian SMEs into global value chains. Investments in industrial clusters are also expected to reinforce local supply chains, support balanced regional industrial development and generate quality employment opportunities. The initiative complements measures related to digitalisation, credit support, ease of doing business, public procurement, startup promotion and production-linked incentive programmes, while supporting the emergence of a new generation of Indian companies capable of competing at the global level. The SME Growth Fund is expected to contribute to innovation-led industrialisation and advance the vision of Viksit Bharat @ 2047.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.