The Union Cabinet has approved a commitment of ₹10,000 crore towards establishing the SME Growth Fund (SGF) as part of the Union Budget 2026-27 announcements. The fund is designed to provide patient equity capital to high-potential Small and Medium Enterprises (SMEs) with demonstrated business viability and scalability across manufacturing, services, technology, innovation-driven sectors and strategic value chains.
Enterprises are classified as micro, small or medium based on investment in plant and machinery or equipment and annual turnover. Under the criteria effective from April 2025, a small enterprise has investment of up to ₹25 crore and turnover of up to ₹100 crore, while a medium enterprise has investment of up to ₹125 crore and turnover of up to ₹500 crore.
The SME Growth Fund will operate as an Alternative Investment Fund (AIF) established under the SGF framework, focusing primarily on manufacturing-focused enterprises. A major share of allocations will be directed towards SMEs seeking to expand manufacturing capacity, adopt advanced technologies, improve productivity and strengthen export competitiveness. The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities to support balanced regional industrial development, strengthen local supply chains and generate quality employment opportunities.
According to the Economic Survey 2025-26, MSMEs account for 31.1% of GDP, 35.4% of manufacturing output and 48.58% of exports. As of 6 October 2026, total MSME registrations under Udyam and the Udyam Assist Platform reached approximately 9.78 crore, reporting around 43.28 crore employment opportunities. Female-owned enterprises account for 37.6% of total registrations. The registered base is spread across trading (approximately 4.08 crore registrations), services (approximately 3.77 crore registrations) and manufacturing (approximately 1.93 crore registrations).
The fund addresses the gap where existing equity funds largely focus on early-stage enterprises covering Micro enterprises, creating scope to expand access to growth equity capital for Small and Medium Enterprises. Such capital supports scale operations, undertake acquisitions, foster innovation, integrate into global value chains, adopt advanced technology, invest in manufacturing capacity and expand into international markets.
The initiative complements ongoing MSME support schemes including Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for credit and finance support, Prime Minister's Employment Generation Programme (PMEGP) for employment generation, PM Vishwakarma for end-to-end support, and various programs for training, entrepreneurship development, technology infrastructure and public procurement.
The fund aims to build a strong pipeline of Indian companies with the scale, manufacturing capability and competitiveness required to become sectoral champions, advancing the vision of Atmanirbhar Bharat and Viksit Bharat@2047 while making growth more inclusive across regions.