The 'missing middle' in India's enterprise structure is as much a problem of equity as of credit. In this light, examine the significance of the SME Growth Fund.

India's 'missing middle' is the thin layer of firms between many micro units and a few large corporates. Formal lenders meet only about 16% of MSME credit demand [5], and the equity gap was put at roughly ₹64,000 crore [4]. The ₹10,000-crore SME Growth Fund [1] addresses the equity side.

Why the missing middle is also an equity problem

• Debt ceiling: Firms that already carry debt cannot borrow more to grow. They need risk capital that does not require fixed repayments.
• Skewed supply: Existing equity funds mostly back early-stage and micro firms. Small and medium firms at the growth stage are left out [1].
• Low equity-readiness: Only about a tenth of MSME equity demand was judged "viable and addressable" [4]. Informal accounts and owners' reluctance to share ownership keep investors away.

Significance of the SME Growth Fund

• Economic: It gives long-term growth capital for technology and manufacturing capacity. Most of it goes to manufacturing-focused SMEs [1].
• Strategic: It helps SMEs enter international markets and global value chains (GVCs), including strategic value chains. The aim is to build "champion Indian enterprises" [1].
• Regional: It covers industrial clusters in Tier II and III cities, which supports job-rich and balanced growth [1].
• Policy shift: It adds equity to support that has so far been mostly debt, so firms can grow without taking on more loans.

Limitations

• Slow deployment before: The ₹10,000-crore Self-Reliant India (SRI) Fund (2020) aimed to raise ₹50,000 crore at a 1:4 public-to-private ratio [2]. So far it has reached fewer than 700 MSMEs through 69 daughter funds [3].
• Overlap: Budget 2026-27 also gave the SRI Fund another ₹2,000 crore [3]. Both funds may chase the same few equity-ready firms.
• Unclear "select criteria" [1] could steer money to firms that are already strong.

Way forward

• Publish the selection criteria and report deployment by city tier and sector.
• Require private co-investment ratios so the fund draws in private money instead of replacing it.
• Use the SEBI-registered NSIC Venture Capital Fund structure [3] with a clear split between the two funds. Pair it with help to formalise accounts and cheaper working capital.

The SME Growth Fund rightly recognises that the missing middle needs ownership capital, not just loans. If it is backed by credit reforms, transparent governance and help for firms to become equity-ready, it can turn promising SMEs into mid-sized manufacturing champions. That would advance SDG 8 (decent work and economic growth).