SME Growth Fund (SGF)

Why in News?

The Union Cabinet has approved a ₹10,000 crore commitment towards establishing the SME Growth Fund (SGF) to support the expansion and development of small and medium enterprises. The initiative, announced as part of the broader measures under the Union Budget 2026-27, aims to provide equity, liquidity and professional support to the MSME ecosystem and promote the emergence of high-growth enterprises.

About SME Growth Fund

The SME Growth Fund will provide patient equity capital to high-potential SMEs with demonstrated business viability and scalability. It will operate as a direct equity investment fund in the form of an Alternative Investment Fund (AIF) established under the SGF framework.

A major share of the Fund’s allocations will support manufacturing-focused SMEs, particularly enterprises seeking to expand production capacity, adopt advanced technologies, improve productivity and strengthen export competitiveness. It will also consider SMEs operating in industrial clusters in Tier-II and Tier-III cities.

The Fund aims to support the emergence of champion enterprises across manufacturing, services, technology, innovation-driven sectors and strategic value chains.

An Alternative Investment Fund (AIF) is a privately pooled investment vehicle established in India that raises funds from investors and invests them according to a defined investment policy.

Classification of Small and Medium Enterprises

Enterprises are classified as micro, small or medium enterprises based on their investment in plant and machinery or equipment and annual turnover. Under the criteria effective from April 2025, a small enterprise can have investment of up to ₹25 crore and annual turnover of up to ₹100 crore, while a medium enterprise can have investment of up to ₹125 crore and annual turnover of up to ₹500 crore.

According to the Economic Survey 2025-26, MSMEs contribute 31.1% of India’s GDP, 35.4% of manufacturing output and 48.58% of exports, highlighting their importance to employment, production, exports and innovation.

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