The Union Cabinet, chaired by Prime Minister Narendra Modi, on 6 October 2026 approved the government's ₹10,000 crore commitment towards the establishment of the SME Growth Fund (SGF), a new equity vehicle for growth-oriented small and medium enterprises.
The fund was announced in the Union Budget 2026-27 as part of the "Creating Champion MSMEs" strategy. The government will commit the amount to an Alternative Investment Fund (AIF) that makes direct equity investments in SMEs with established operations and the potential to scale — addressing what the government calls a structural gap, since existing equity schemes largely focus on early-stage businesses and micro enterprises.
A majority of the fund's investments will go to manufacturing-focused SMEs, and businesses in industrial clusters in Tier II and Tier III cities will also be considered. The money can be used to expand capacity, invest in advanced technologies, enter international markets, integrate into global supply chains and make strategic investments or acquisitions.
Briefing the media, Union Minister Ashwini Vaishnaw said the fund was set up with an eye on the opportunities unlocked by recent Free Trade Agreements with countries such as New Zealand, Australia, the UAE and the UK. The fund manager, ticket sizes, tenure and eligibility thresholds have not yet been disclosed.
Why it matters for founders
₹10,000 crore of patient equity is about to chase exactly the stage most overlooked: SMEs that have outgrown seed money but are too small for PE. If you're building in manufacturing, Tier II/III clusters or strategic value chains, the SGF will become the biggest domestic check-writer to court — watch for the fund manager announcement and get in line early.
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