The initiative is part of the announcements made in the Union Budget 2026-27 to strengthen the MSME ecosystem by improving access to equity, liquidity and professional support.

While several existing funds provide equity support to businesses, most focus on early-stage enterprises and primarily cater to micro enterprises. A structural gap remains in the availability of growth-stage equity capital for small and medium enterprises.

“The landmark initiative reflects the Government’s commitment towards realising the vision of Viksit Bharat 2047 by strengthening India’s entrepreneurship ecosystem, deepening the domestic capital market for growth-stage enterprises, and creating a new generation of Indian companies capable of competing at the global level,” the government said in a statement.

“SMEs constitute the backbone of the Indian economy, contributing significantly to employment generation, exports, manufacturing output, and innovation,” it added.

While various government initiatives have improved access to credit for SMEs, a financing gap remains in long-term risk capital needed by businesses seeking to scale operations, innovate, expand internationally, adopt advanced technologies, undertake acquisitions and emerge as industry leaders.

The SME Growth Fund is designed to address this gap by providing patient growth equity capital to high-potential SMEs with demonstrated business viability and scalability.

The fund is envisaged as a transformational instrument to support enterprises at critical stages of their growth journey. A majority of the SGF allocation will be directed towards small and medium manufacturing enterprises. The fund will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.

By providing long-term capital, the initiative is expected to enable Indian SMEs to expand operations, invest in technology and manufacturing capacity, enter international markets, integrate into global value chains and undertake strategic investments.

The government expects the fund to accelerate the development of a strong pipeline of Indian companies with the scale, innovation capabilities and competitiveness required to become leaders in their respective sectors.

The government’s commitment to the SME Growth Fund complements its ongoing efforts to strengthen the sector through reforms, digitalisation initiatives, credit support mechanisms, ease-of-doing-business measures, public procurement reforms, startup promotion initiatives and production-linked incentive programmes.

Under the initiative, the Government of India will provide an aggregate commitment of Rs 10,000 crore to an Alternative Investment Fund (AIF) established under the SGF framework.

By enabling manufacturing enterprises to expand capacity, adopt advanced technologies and achieve greater scale, the SGF is expected to improve productivity and strengthen India’s export competitiveness.

Investments across industrial clusters, including those in Tier-II and Tier-III cities, are also expected to support balanced regional industrial development, strengthen local supply chains and generate high-quality employment opportunities.

With the initiative, the government reaffirmed its commitment to empowering Indian entrepreneurs and fostering a new generation of globally competitive enterprises. By catalysing investment in high-growth SMEs, the fund is expected to support the creation of industry champions, drive innovation-led industrialisation and generate quality employment opportunities across the country.

The initiative is expected to serve as a key pillar in advancing the vision of Viksit Bharat @ 2047.