The Union Cabinet on Tuesday (6 October) approved a commitment of Rs 10,000 crore towards establishment of the SME Growth Fund for direct equity investments in small and medium enterprises.
The decision was taken at the Union Cabinet meeting headed by Prime Minister Narendra Modi, with the fund announced under Budget 2026-27 as part of the government’s three-pronged approach under its “Creating Champion MSMEs” strategy.
In a briefing on Cabinet decisions, Information and Broadcasting Minister Ashwini Vaishnaw told media that existing funds provide equity support but the majority focus on early-stage enterprises and cover majorly micro-enterprises in the country.
The fund will be set up as an Alternative Investment Fund and will provide growth capital to SMEs seeking to expand capacity, adopt technology, enter international markets, undertake acquisitions and integrate into global value chains.
A majority of the fund’s allocation will be towards small and medium manufacturing enterprises, and it will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.
The initiative aims to address a structural gap in long-term growth capital available to SMEs, particularly enterprises seeking to scale operations, adopt advanced technologies, expand internationally and integrate into global value chains.
The government expects the fund will provide long-term capital to businesses with established operations and potential to scale, helping SMEs expand their manufacturing capacity, improve productivity, increase exports and participate in global supply chains.
Under this scheme, the government will provide patient capital for innovation, acquisitions and strategic investments needed to become industry leaders and support employment generation through capacity expansion and scaling up of SMEs, while strengthening local supply chains across India.
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