Cabinet Approves ₹10,000 Crore Fund to Strengthen SME Manufacturing

The Union Cabinet approved a ₹10,000‑crore Small and Medium Enterprises (SME) Growth Fund on Tuesday, aiming to channel growth‑oriented capital to Indian SMEs. The fund was first outlined in the Union Budget 2026 by Finance Minister Nirmala Sitharaman as a tool to incentivise enterprises that meet select criteria. A government release said existing equity funds mainly support early‑stage and micro firms, leaving a structural gap for growth‑stage capital for small and medium businesses. Around two‑thirds of the fund’s allocation will go to manufacturing‑focused SMEs, with eligibility extended to firms operating in industrial clusters of Tier‑II and Tier‑III cities. Long‑term capital from the fund is expected to help SMEs scale operations, adopt new technology, expand into export markets and integrate into global value chains. The initiative is part of a wider push that includes digitalisation, credit‑support mechanisms, ease‑of‑doing‑business reforms, public‑procurement changes, startup promotion and production‑linked incentive programmes. Officials said the fund should raise productivity, improve export competitiveness and generate high‑quality jobs by strengthening local supply chains. By targeting balanced regional industrial development, the scheme seeks to reinforce industrial clusters beyond the major metros.

Context

SMEs provide a large share of India’s employment and GDP but often lack equity for expansion beyond the start‑up phase. The new fund aims to fill that gap by supplying patient capital to firms that can drive manufacturing growth and regional development.