Cabinet Clears ₹10,000 Cr SME Fund To Back Manufacturing, Tech Focused SMEs

The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the government’s ₹10,000 Cr SME Growth Fund (SGF) to offer growth credit capital to small and medium enterprises.

Announced in Budget 2026-27, the fund will invest in high-potential SMEs across manufacturing, services, technology, innovation-driven sectors and strategic value chains. A majority of the allocation of the fund will go towards manufacturing-focused enterprises.

The initiative aims to widen access to equity and liquidity for MSMEs and help promising Indian businesses scale into globally competitive companies.

The SGF is meant to fill the gap in growth capital for SMEs, as most existing funds focus on early-stage and micro enterprises. Under the framework, the government will commit ₹10,000 Cr to alternative investment funds (AIFs), that will subsequently invest in high-potential SMEs.

This will help businesses expand operations, increase manufacturing capacity, adopt new technologies, enter international markets and integrate into global supply chains.

Centre’s MSME Funding Push

The SGF is part of the government’s wider push to support the MSME sector via credit, digitalisation, ease of doing business, public procurement and other initiatives.

The fund will also support SMEs in industrial clusters across Tier II and Tier III cities, with the aim of strengthening local supply chains and creating jobs.

As part of the ‘Creating Champion MSMEs’ strategy announced in Budget 2026-27, finance minister Nirmala Sitharaman had also proposed an additional ₹2,000 Cr for ‘Self-Reliant India Fund’ to support micro enterprises and provide them with access to risk capital.

The Budget also proposed several measures to improve cash flow for MSMEs through the Trade Receivables e-Discounting System (TReDS). This includes making TReDS the settlement platform for purchases from MSMEs by central public sector enterprises (CPSEs).

The government also proposed a credit guarantee mechanism through CGTMSE for invoice discounting on TReDS, linking the Government e-Marketplace (GeM) with TReDS and allowing TReDS receivables to be used as asset-backed securities.

As per the Economic Survey 2025-26, India’s MSME sector accounts for approximately 35.4% of manufacturing, around 48.58% of exports, and 31.1% of India’s GDP. 

With over 7.47 Cr enterprises employing over 32.82 Cr persons, the sector holds its position as the second-largest employer after agriculture.

“With India’s manufacturing sector positioned for greater global integration, MSME sector’s role is critical in enabling effective supply-chain participation, fostering local value addition, and supporting inclusive regional growth,” the Survey said.

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