The Union Cabinet, chaired by Prime Minister Narendra Modi, approved a ₹10,000 crore SME Growth Fund (SGF) to provide growth capital to small and medium enterprises. Announced in the Budget 2026-27, the fund targets high-potential SMEs in manufacturing, services, technology, and innovation-driven sectors. A majority of the allocation will focus on manufacturing enterprises, aiming to help Indian SMEs scale globally, according to inc42.com.
The SGF will operate by the government committing ₹10,000 crore to alternative investment funds (AIFs), which will then invest in promising SMEs. This structure is designed to fill the gap in growth capital, as most existing funds focus on early-stage or micro enterprises. The initiative supports expansion of operations, manufacturing capacity, technology adoption, and integration into global supply chains. It also targets SMEs in industrial clusters in Tier II and III cities to strengthen local supply chains and generate employment, inc42.com reported.
This fund is part of a broader government push to support the MSME sector through credit access, digitalisation, ease of doing business, and public procurement reforms. The SGF aligns with the ‘Creating Champion MSMEs’ strategy outlined in the Budget 2026-27. By focusing on manufacturing and tech-driven SMEs, the fund aims to address a critical funding gap and enhance competitiveness, complementing other initiatives to boost MSME growth in India, according to inc42.com.
The government’s ₹10,000 crore commitment to the SME Growth Fund was formally approved by the Union Cabinet this week, marking a significant step in the MSME sector’s development. The next phase involves deploying these funds through AIFs to selected SMEs across sectors and regions, as detailed in the Budget 2026-27 documentation.