The Union Cabinet on Tuesday approved a ₹10,000 crore government commitment to an SME Growth Fund that will provide direct equity investments to small and medium enterprises (SMEs), with a focus on manufacturing. The ₹10,000 crore commitment was announced as part of the Union Budget 2026-27.
The fund will be set up as an Alternative Investment Fund (AIF) and will provide growth capital to SMEs seeking to expand capacity, adopt technology, enter international markets, undertake acquisitions and integrate into global value chains, according to the government.
A majority of the fund’s allocation will be towards small and medium manufacturing enterprises. It will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
The fund is intended to address a gap in growth-stage equity financing for small and medium enterprises. Existing funds providing equity support largely focus on early-stage businesses and micro enterprises, the government said.
The fund will provide long-term capital to businesses with established operations and potential to scale. The government expects the investments to help SMEs expand their manufacturing capacity, improve productivity, increase exports and participate in global supply chains.
Investments in industrial clusters in smaller cities are also expected to support local supply chains and employment.
The government has also highlighted credit support, digitalisation, public procurement reforms, startup initiatives and production-linked incentive schemes as part of its broader measures for the MSME sector.
