Indian Cabinet Approves ₹10,000 Crore SME Growth Fund
The Union Cabinet has approved a commitment of ₹10,000 crore towards establishing the SME Growth Fund (SGF) to provide patient equity capital to high-potential small and medium enterprises. The fund is designed as a direct equity investment fund and will operate as an Alternative Investment Fund (AIF) established under the SGF framework, targeting SMEs with demonstrated business viability and scalability.
SME Classification and Economic Significance
Enterprises are classified as micro, small, or medium based on investment in plant and machinery/equipment and annual turnover. Under criteria effective from April 2025, a small enterprise has investment up to ₹25 crore and turnover up to ₹100 crore, while a medium enterprise has investment up to ₹125 crore and turnover up to ₹500 crore. MSMEs form the backbone of the Indian economy, contributing 31.1% to GDP, 35.4% to manufacturing output, and 48.58% to exports according to the Economic Survey 2025-26. As of 6 October 2026, total MSME registrations under Udyam and Udyam Assist Platform reached approximately 9.78 crore, reporting about 43.28 crore employment opportunities, with female-owned enterprises accounting for 37.6% of total registrations.
Strategic Investment Focus and Operational Framework
The fund will primarily focus on manufacturing-focused enterprises, directing a major share of allocations to support capacity expansion, advanced technology adoption, productivity improvement, and export competitiveness strengthening. It 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. The initiative addresses the gap in equity funding for SMEs, as existing funds largely focus on early-stage micro enterprises, while growth capital is critical for SMEs to scale operations, undertake acquisitions, foster innovation, integrate into global value chains, adopt advanced technology, invest in manufacturing capacity, and expand into international markets.
Complementary MSME Support Ecosystem
The SME Growth Fund complements existing 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 including MSME Skilling, Entrepreneurship and Skill Development Programme (ESDP), ASPIRE, Raising and Accelerating MSME Performance (RAMP), Zero Defect (ZED) Scheme, Tool Room and Tech Centre, and MSME SAMBANDH and SC/ST Hub for public procurement.
The initiative aims to build a strong pipeline of Indian companies with the scale, manufacturing capability, and competitiveness required to become sectoral champions, supporting the vision of Atmanirbhar Bharat and Viksit Bharat@2047 by making growth more inclusive across the country.