Union Cabinet Approves ₹10,000-Crore SME Growth Fund for Direct Equity Investments in MSMEs

New Delhi: The Union Cabinet on Tuesday approved a commitment of Rs 10,000 crore towards establishment of the SME Growth Fund (SGF) for direct equity investments in the small and medium enterprise (MSME) sector to create the future champions in the country.

The decision was taken at the Union Cabinet meeting headed by Prime Minister Narendra Modi.

The fund, announced under Budget 2026-27, is a part of the government’s three-pronged approach under its “Creating Champion MSMEs” strategy.

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.

Announcing the initiative, Union minister for electronics and information technology Ashwini Vaishnaw told media that there are existing funds, which provide equity support, but the majority of them focus on early-stage enterprises and cover majorly micro-enterprises in the country.

A structural gap exists for equity growth capital for SMEs.

The minister, however, said that SMEs constitute the backbone of the Indian economy, contributing significantly to employment generation, exports, manufacturing output, and innovation.

“While various initiatives have enhanced access to credit for SMEs, a gap remains in the availability of long-term risk capital required by enterprises seeking to scale, innovate, expand internationally, adopt advanced technologies, undertake acquisitions, and transform into industry leaders,” he said.

As per the government, the SGF will enable SMEs to scale operations, expand manufacturing capacity and adopt advanced technologies and support entry into international markets, integration into global value chains and stronger export competitiveness.

“The SGF is designed to address this critical financing gap by providing patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability,” the minister said.