- Union Cabinet approved a ₹10,000 crore commitment for the SME Growth Fund
- The fund will provide patient equity capital to high-potential small and medium enterprises
- Manufacturing firms will get a major share of allocations
- SMEs in industrial clusters in Tier-II and Tier-III cities will also be considered
- The fund is part of the Union Budget 2026-27 announcements
The Union Cabinet has approved a ₹10,000 crore commitment to set up the SME Growth Fund (SGF), aimed at scaling up small and medium enterprises. The fund will give patient equity capital to firms with proven viability and room to grow.
What the fund will do
The fund will invest directly in equity and will operate as an Alternative Investment Fund (AIF) under the SGF framework. An AIF is a privately pooled fund that raises money from investors and invests it under a defined policy.
It will back enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains. A major share of allocations will go to small and medium manufacturing firms seeking to expand capacity, adopt advanced technology, raise productivity and strengthen export competitiveness.
The fund will also consider SMEs in industrial clusters in Tier-II and Tier-III cities. The government expects this to support balanced regional industrial growth, stronger local supply chains and quality jobs.
Why SMEs need growth capital
Existing equity funds mostly focus on early-stage enterprises, including micro units. The government says this leaves a gap in growth equity for small and medium enterprises.
Long-term growth capital can help SMEs scale operations, foster innovation, adopt new technology, invest in manufacturing capacity, undertake acquisitions, integrate into global value chains and expand into international markets.
Size of the MSME sector
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, MSME registrations under Udyam and the Udyam Assist Platform (UAP) reached about 9.78 crore. Registered MSMEs have reported about 43.28 crore employment opportunities. Female-owned enterprises make up 37.6% of registrations.
| Sector | Registrations (approx.) |
|---|---|
| Trading | 4.08 crore |
| Services | 3.77 crore |
| Manufacturing | 1.93 crore |
Size limits and wider support
Under the criteria effective from April 2025, a small enterprise has investment of up to ₹25 crore and turnover of up to ₹100 crore. A medium enterprise has investment of up to ₹125 crore and turnover of up to ₹500 crore.
The fund is part of a set of announcements under the Union Budget 2026-27, focused on equity, liquidity and professional support. MSMEs already get help in finance, employment, skills, technology, end-to-end assistance and public procurement. Key schemes include CGTMSE, PMEGP, PM Vishwakarma, RAMP, ZED and MSME SAMBANDH.
The government says the fund will complement reforms, digitalisation, credit support and ease of doing business measures. It aims to promote innovation-led industrialisation and advance the vision of Atmanirbhar Bharat and Viksit Bharat@2047.
