Cabinet clears ₹10,000 crore SME fund to help Indian companies scale, compete globally. How it'll work

The Union Cabinet on Tuesday approved a ₹10,000-crore government commitment to set up an SME Growth Fund aimed at providing long-term equity capital to small and medium enterprises and helping create a new generation of Indian companies capable of competing globally.

The fund, announced as part of the Union Budget 2026-27, will make direct equity investments in SMEs with viable businesses and the potential to scale. The government said the initiative is intended to address a gap in growth-stage equity funding for SMEs.

Focus on manufacturing, Tier-II and Tier-III Cities

The government said existing funds provide equity support but largely focus on early-stage enterprises and micro enterprises. This has left a structural gap in equity capital for small and medium enterprises looking to expand.

A majority of the SME Growth Fund's allocation will go towards small and medium manufacturing-focused enterprises. The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.

The government said the fund will provide "patient growth equity capital" to high-potential SMEs at critical points in their growth journey.

The capital is expected to help companies scale operations, invest in technology and manufacturing capacity, expand internationally, enter global value chains and undertake acquisitions and other strategic investments.

Government to commit ₹10,000 crore

Under the initiative, the government will provide an aggregate ₹10,000-crore commitment to an Alternative Investment Fund established under the SME Growth Fund framework.

The government expects the fund to build a pipeline of Indian companies with the scale, innovation capability and competitiveness to become leaders in their sectors.

By supporting manufacturing companies in expanding capacity and adopting advanced technologies, the fund is also expected to improve productivity and export competitiveness.

Investments in industrial clusters, including those in Tier-II and Tier-III cities, are expected to support regional industrial development, local supply chains and employment.

Part of broader MSME push

The government said the SME Growth Fund is part of a wider set of measures announced in the Union Budget 2026-27 to provide equity, liquidity and professional support to the MSME ecosystem.

The initiative complements measures covering credit support, digitalisation, ease of doing business, public procurement, startup promotion and production-linked incentive programmes.

The government said the fund will help "create champions, drive innovation-led industrialization, and generate quality employment opportunities" as part of its broader Viksit Bharat @ 2047 vision.