New Delhi, October 6: The Union Cabinet on Tuesday approved a ₹10,000 crore commitment from the Centre to set up the SME Growth Fund, which will put long-term equity capital into small and medium enterprises that want to grow.
The Cabinet, chaired by Prime Minister Narendra Modi, cleared the fund in line with Para 28 of the Union Budget 2026-27. The government’s money will go to an Alternative Investment Fund (AIF) set up under the SME Growth Fund framework.
Most of the money for manufacturing
According to the government, the larger share of the fund will go to small and medium enterprises focused on manufacturing. Firms in industrial clusters in Tier-II and Tier-III cities will also be considered.
The fund will back businesses that have shown they are viable and can scale up. The government says companies can use the capital to expand capacity, invest in technology, enter international markets, join global value chains and make strategic investments, including acquisitions.
A gap in growth capital
The government said most existing equity funds concentrate on early-stage companies and largely support micro enterprises, leaving a structural gap in growth capital for small and medium firms. While access to credit has improved, long-term risk capital for firms trying to scale up has remained scarce, it said.
The SME Growth Fund is meant to close that gap by providing patient growth equity to high-potential SMEs.
Part of a wider MSME package
The decision is one of a set of Budget 2026-27 announcements on equity, liquidity and professional support for micro, small and medium enterprises. The government said the fund adds to existing measures such as credit support, public procurement reforms, digitalisation, ease of doing business, startup promotion and production-linked incentive schemes.
The government expects investment across industrial clusters to support balanced regional development, strengthen local supply chains and create jobs. It also expects the fund to help manufacturers raise productivity and become more competitive in exports.
Related: RoDTEP scheme extended till 31 December 2026; RELIEF timelines for exporters also stretched