India launches ₹10,000 Cr SME fund for direct equity stakes

The Indian government has cleared a ₹10,000 crore SME Growth Fund to make direct equity investments in small and medium enterprises, with a focus on manufacturing and technology sectors. The fund, approved by the Union Cabinet, was first reported by Inc42 and later confirmed by YourStory.

This move departs from India’s typical SME support mechanisms, which have historically relied on debt financing or credit guarantees. The fund’s structure suggests a long-term bet on high-potential SMEs, though details on selection criteria, investment size, and timeline remain undisclosed. When StartupReader covered the fund’s initial approval earlier this month, the emphasis was on manufacturing, but recent reports indicate technology startups may also be eligible.

The announcement arrives amid broader regulatory shifts, including proposed social media restrictions for minors—a separate but parallel policy push that has drawn attention to India’s digital governance priorities. For startups, the fund’s equity-based approach could ease pressure to chase short-term profitability, particularly in capital-intensive sectors like hardware and deep tech. However, whether the fund will prioritize early-stage ventures or later-stage scale-ups remains an open question.

Sources: yourstory.com