Centre Commits ₹10,000 Cr To SME Growth Fund To Plug Equity Gap For Small And Medium Firms

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved a ₹10,000 crore commitment from the Centre to set up the SME Growth Fund (SGF), a pool designed to supply long-term equity to small and medium enterprises (SMEs) that are ready to scale up, the government said in a statement.

The fund was announced in Para 28 of Union Budget 2026-27, as part of a package meant to give the MSME sector equity, liquidity and professional support. The Cabinet's nod gives that announcement a fixed financial commitment from the Centre, which will be routed into an Alternative Investment Fund (AIF) set up under the SGF framework.

It will back growth-oriented SMEs across manufacturing, services, technology, innovation-driven sectors and strategic value chains, with the stated aim of helping Indian champions emerge in each of them, according to the statement.

Where The Funding Gap Lies

The government described SMEs as the backbone of the economy, contributing to employment, exports, manufacturing output and innovation. It said existing equity funds mostly back early-stage businesses and largely serve micro enterprises, leaving a structural gap for small and medium firms.

Credit access for SMEs has improved through various initiatives, the statement said, but long-term risk capital remains hard to find for firms that want to expand abroad, adopt advanced technology, make acquisitions or grow into industry leaders. The SGF will offer patient growth equity to high-potential SMEs with demonstrated business viability and scalability, and the government called it a "transformational instrument" for companies at critical inflection points.

Manufacturers To Get The Larger Share

Most of the allocation from the SGF will go to small and medium manufacturers. The fund will also consider SMEs operating in industrial clusters in Tier II and Tier III cities, which the government said would support balanced regional industrial development, reinforce local supply chains and generate quality jobs.

By helping manufacturers add capacity, adopt advanced technology and gain scale, the government expects the SGF to lift productivity and strengthen the export competitiveness of Indian manufacturing.

Building Sector Champions

With long-term capital in hand, SMEs would be able to invest in technology and capacity, enter international markets, plug into global value chains and make strategic investments, the statement said. The government expects this to produce a pipeline of Indian companies with the scale, innovation capability and competitiveness to lead their sectors.

The government said the fund adds to its ongoing efforts to strengthen the sector, including reforms, digitalisation, credit support mechanisms, ease of doing business measures, public procurement reforms, startup promotion and production-linked incentive programmes.

The government said the move reaffirms its commitment to empowering the country's entrepreneurs and fostering a new generation of competitive enterprises. It also tied the fund to the Viksit Bharat 2047 vision, saying it would strengthen the entrepreneurship ecosystem, deepen the domestic capital market for growth-stage companies and help build firms that can compete globally. The initiative, it said, will drive innovation-led industrialisation and generate quality employment across the country.

The statement did not give the total corpus of the AIF, the fund manager or a timeline for its first investments.