Classrooms to Careers: What the Union Budget 2026–27 Gets Right and Misses

The National Education Policy (NEP) 2020 marked a major reform moment, setting an ambitious roadmap for a sector that touches nearly half of India’s population. However, translating its vision into reality requires sustained and phased public investment.

Positioning NEP 2020 as the guiding framework, the Union Budget 2026–27 foregrounds “Education to Employment and Enterprise” at the heart of its vision for Viksit Bharat, emphasising better schools, stronger skills, and smoother pathways to employment. This narrative, however, is not new.

Positioning NEP 2020 as the guiding framework, the Union Budget 2026–27 foregrounds “Education to Employment and Enterprise” at the heart of its vision for Viksit Bharat, emphasising better schools, stronger skills, and smoother pathways to employment. This narrative, however, is not new. Both 2024–25 and 2025–26 budget speeches articulated similar goals—‘100% quality school education and 100% skilled labour with meaningful employment’. Yet, the fiscal commitment behind these promises remains limited.

The Ministry of Education (MoE) has received Rs 1.39 lakh crore this year, an 8.17% increase over last year’s budget estimates, but the Parliamentary Standing Committees on School and Higher Education observes that existing allocations fall short of what is required for the meaningful implementation of NEP 2020. Despite the Committees’ recommendation of an 8–10% annual budget increase to safeguard real expenditure, education continues to account for only 2.6% of the Union Budget and 0.36% of GDP, a share that has barely moved over time.

School Education: A Foundation Under Strain

A closer look at this year’s budget reveals that 80% of the DSEL’s budget will be financed through an education cess, of which 66% will be raised through a primary education cess and 14% through a secondary and higher secondary education cess

Nearly 60% of the MoE’s budget (Rs 83,562 crore) has gone to the Department of School Education and Literacy (DSEL). While this represents a 6.35% increase from last year, school education’s share of GDP has marginally declined from 0.36% to 0.35%. A closer look at this year’s budget reveals that 80% of the DSEL’s budget will be financed through an education cess, of which 66% will be raised through a primary education cess and 14% through a secondary and higher secondary education cess.

Schemes such as Samagra Shiksha and PM POSHAN, which are critical for universal access and student retention, have seen only incremental increases, Rs 850 crore and Rs 250 crore, respectively, from 2025–26 budget estimates. Notably, both schemes will be fully financed through education cesses. This continued dependence on earmarked funds, rather than core budgetary support, limits the system’s flexibility to respond to emerging needs.

Secondary education is a pivotal stage in India’s schooling continuum, shaping pathways to higher education, skilling, and employment. This is also where the system faces acute challenges, as gains made in elementary education begin to taper off. Despite rising enrolments over the past decade, secondary education remains characterised by uneven access, low participation, and persistent quality deficits. The NEP 2020 sets an ambitious goal of achieving a 100% Gross Enrolment Ratio across all levels of school education by 2030, but while this ratio for elementary education is 92.7%, secondary education remains far from universal. According to the Annual Status of Education Report 2024, dropout rates are especially high among marginalised groups: 12% for Scheduled Caste (SC) girls and 15% for Scheduled Tribe (ST) girls.

One of the key drivers of dropout at secondary level is the cost of education. Evidence shows that both monetary incentives (scholarships, stipends, or direct cash transfers) and non-monetary incentives (free bicycle, books, laptops, etc.) play a crucial role in determining the enrolment and retention of children from vulnerable communities. Yet, allocations for pre-matric scholarships for SC, ST, and minority students have either stagnated or declined, raising concerns about the feasibility of achieving equitable secondary education expansion.

Persistent underspending further weakens the system. In 2024–25, the DSEL spent nearly Rs 8,000 crore less than what was allocated. According to the Controller General of Accounts, by December 2025–26, the DSEL had spent only 40% of the budget estimate, seven percentage points lower than the same period last year. These gaps do not reflect a lack of need, but rather persistent implementation and capacity constraints, the costs of which are ultimately borne by children in government schools.

Model Schools: Growing Preference

In recent years, budgetary priorities within school education have tilted visibly. Kendriya Vidyalayas (KVs), Navodaya Vidyalayas (NVs), and PM-SHRI schools, showcased as the Union Government’s exemplar institutions, have attracted disproportionately higher allocations. Funding for KVs has reached Rs 10,129 crore, while the PM-SHRI scheme has again received Rs 7,500 crore, the same as last year, despite utilisation rates hovering around 60% over the past two fiscal years. Between the 2019–20 actuals and the 2026–27 budget estimate, the share of these model schools in the total DSEL budget increased from 19% to 28%, while the share of Samagra Shiksha Abhiyan declined from 62% to 50%.

Model schools clearly matter, but not at the cost of general-category government and government-aided schools, which constitute nearly 74% of all schools and enrol around 60% of all students, yet continue to function with persistently constrained resources.

Model schools clearly matter, but not at the cost of general-category government and government-aided schools, which constitute nearly 74% of all schools and enrol around 60% of all students, yet continue to function with persistently constrained resources. It is important to note that shortage of human resources remain a challenge even for KVs and NVs: As of 30 September 2025, 7% of teaching posts and 28% of non-teaching posts in KVs and 25% of teaching posts and 18% of non-teaching posts in NVs were vacant.

Skill Education: More Vision Than Funding

The budget’s broader push for skilling, innovation, and future-ready capabilities through design institutes, creator labs, and technology-focused initiatives signals recognition of changing labour market needs. The focus on the school–skill–work linkage is welcome, given that 33% of India’s youth aged 15–29 are not in education, employment, or training.

Yet the allocations tell a more cautious story. The Ministry of Skill Development and Entrepreneurship (MSDE) has been allocated Rs 9,886 crore for 2026–27. However, utilisation remains a concern: It spent only 61% of its allocation in 2024–25 and just 44% of the revised estimate in 2025–26. Actual expenditure for 2025–26 could be even lower, as only 15% of the total allocation had been spent by December 2025. The Skill India Programme has been allocated Rs 2,800 crore through Madhyamik and Uchhatar Madhyamik Shiksha Kosh, only Rs 100 crore more than last year’s budget estimates, despite the strong skilling push in this year’s budget narrative. Past performance also raises concerns: A Comptroller and Auditor General audit of Pradhan Mantri Kaushal Vikash Yojana in 2025 found that only 43% of candidates certified under short-term training were placed, and nearly 20% of funds allocated to states between 2016–24 remained unutilised as of March 2024.

A significant announcement is the upgradation of 1,000 Industrial Training Institutes (ITIs) and the establishment of five National Centres of Excellence for Skilling under the renamed PM SETU scheme, which has received an allocation of Rs 6,141 crore. However, against an allocation of Rs 3000 crore as per the 2025–26 budget estimate, only Rs 356 crore, or 12%, was spent in 2025-26 as per the revised estimate. This highlights that while the scale is notable, it alone will not guarantee success. Factors such as instructor quality, state capacity, and alignment with local labour markets, areas where past ITI reforms have struggled, are also equally important in determining impact.

Employment Pathways: The Internship Cautionary Tale

The experience of the PM Internship Scheme offers a sobering lesson. Introduced in the 2024–25 Union Budget to provide one crore internships in the top 500 companies over five years, it failed to gain momentum. Against an allocation of Rs 10,831 crore as per the 2025–26 budget estimate, the revised estimate fell sharply to Rs 526 crore. In 2026–27, the allocation has been reduced to Rs 4,788 crore, a 56% cut from last year.

The low uptake of employment-linked schemes reinforces the fact that skills cannot be built on weak learning foundations. India’s employability challenge is not merely about vocational training after school; it begins much earlier, with basic literacy, numeracy, problem-solving, and exposure to the world of work.

Schools and Skills: Building Together, Not Separately

The low uptake of employment-linked schemes reinforces the fact that skills cannot be built on weak learning foundations. India’s employability challenge is not merely about vocational training after school; it begins much earlier, with basic literacy, numeracy, problem-solving, and exposure to the world of work. When school education stagnates as a share of national resources, skilling interventions risk becoming remedial rather than transformative.

Budget 2026–27 reflects a persistence paradox: strong rhetoric on education, skills, and employment, but cautious investment in the school system that feeds into them. If India is serious about moving from classrooms to careers, budgets must go beyond sustaining schemes to strengthening schools, improving spending efficiency, and linking education with labour markets.

Until then, the journey from schools to skills will remain well-intentioned, but unevenly paved.