Union Cabinet approves ₹10,000-cr SME growth fund to boost manufacturing

The Union Cabinet on Tuesday (October 6, 2026) approved the proposal by the Ministry of Finance to commit ₹10,000 crore of central government funding for the setting up of a Small and Medium Enterprises (SME) Growth Fund in line with a proposal in Budget 2026.

The SME Growth Fund is “aimed at catalysing growth-oriented capital for India’s SMEs and enabling the emergence of champion Indian enterprises across manufacturing, services, technology, innovation-driven sectors, and strategic value chains”, the government said in a release following the Cabinet’s decision.

The Fund was first mentioned in Union Budget 2026, when Finance Minister Nirmala Sitharaman had spoken about it as a means to incentivise enterprises based on select criteria.

“There are existing funds which provide equity support but majority of them focus on early-stage enterprises and cover majorly micro enterprises,” the release added. “A structural gap exists for equity growth capital for small and medium enterprises.”

The government further said that the majority of the allocation from the Fund will be made towards small and medium manufacturing focused enterprises. The Fund will also consider SMEs in industrial clusters in Tier II and Tier III cities, it added.

“By providing long-term capital, the initiative will enable Indian SMEs to scale operations, invest in technology and manufacturing capacity, expand into international markets, integrate into global value chains, and undertake strategic investments,” the release said. 

The release went on to say that the SME Growth Fund was one part of the government’s overall efforts to strengthen the SME sector through reforms, digitalisation initiatives, credit support mechanisms, ease of doing business measures, public procurement reforms, startup promotion initiatives, and production-linked incentive programmes.

“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,” it said. 

“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 added.