New Delhi: The government on Tuesday committed Rs 10,000 crore to establish an SME Growth Fund (SGF) for direct equity investments in Small and Medium Enterprises.
The decision was taken at the Union Cabinet meeting chaired by Prime Minister Narendra Modi.
The Cabinet approved the government commitment of Rs 10,000 crore to establish SGF to catalyse growth-oriented capital for SMEs and create champion Indian enterprises across manufacturing, services, technology, innovation-driven sectors, and strategic value chains, a release said.
The fund was announced in the Union Budget.
Briefing media on the decision, Information and Broadcasting Minister Ashwini Vaishnaw said SGF will be operated in collaboration with the MSME Ministry and the Finance Ministry.
There are existing funds, which provide equity support, but the majority of them focus on early-stage enterprises and cover mainly micro enterprises. A structural gap exists for equity growth capital for Small and Medium Enterprises.
Under the initiative, the government will provide an aggregate commitment of Rs 10,000 crore to the 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 scale, productivity, and strengthen export competitiveness.
Vaishnaw said the majority of the funds will go towards SMEs in the manufacturing segment.
Investments across industrial clusters, including those in Tier-II and Tier-III cities, will support balanced regional industrial development, reinforce local supply chains and generate high-quality employment opportunities, the release said.
With this initiative, the government reaffirms its commitment to empowering India’s entrepreneurs and fostering a new generation of competitive enterprises, it added.
“By catalysing investment in high-growth SMEs, the fund will help create champions, drive innovation-led industrialisation, and generate quality employment opportunities across the country. The initiative will serve as a key pillar in advancing the vision of Viksit Bharat @ 2047,” it said.
Vaishnaw said MSMEs are very important for employment generation, exports, and manufacturing.
“For this reason, the Prime Minister has introduced several reforms, one after another, over the past 12 years. Among the biggest reforms have been aimed at improving the cash flow of MSMEs, particularly by ensuring that payments due to them, which were often delayed, are received on time,” he said.
The definition of MSMEs has also been changed, and steps have been taken to ensure that they can access loans more easily, he pointed out.
“The decision taken today is related to the challenges faced by MSMEs in their growth… For this purpose, a Rs 10,000 crore MSME Growth Fund will be created,” the minister said.
The SME Growth Fund 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 release said.
The fund is envisioned as a transformational instrument to support enterprises at critical inflection points in their growth journey, it said.
