Centre approves ₹10K-crore SME growth fund

The Union cabinet on Tuesday approved a ₹10,000 crore fund to provide equity support to promising small and medium enterprises, ahead of the 57th GST Council meeting that is expected to consider major process reforms for businesses, particularly micro, small and medium enterprises (MSMEs), officials aware of the matter said.

The SME Growth Fund (SGF), proposed in the Union budget, will provide growth capital to enterprises in manufacturing, services, technology and innovation-driven sectors, they said.

In her February 1 budget speech, finance minister Nirmala Sitharaman proposed six interventions as the government’s “first kartavya” to accelerate economic growth. One of these was to create “Champion MSMEs” through equity support from the ₹10,000 crore fund. Its aim, she said, was “to create future champions, incentivizing 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. A structural gap exists for equity growth capital for Small and Medium Enterprises (SMEs),” the government said in a statement.

While several initiatives have improved access to credit, SMEs still face a shortage of long-term risk capital needed to scale up, innovate, expand overseas, adopt advanced technologies and undertake acquisitions, it 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 statement said.

The government’s move comes as the GST Council, chaired by Sitharaman, is expected to meet in New Delhi on Thursday to consider business-friendly reforms.