Amid renewed emphasis on skilling, employability, and digital learning, the Union Budget for 2026–27 has raised education spending to Rs 1.39 lakh crore from Rs 1.28 lakh crore in 2025. The increase looks significant at first glance, but the real question is whether the rise marks a change in direction or simply keeps pace with rising costs.
Chartered Accountant Dr Divya Abhishek says the headline number needs closer reading. “While the nominal rate of increase might seem substantial, the hike is rather modest when seen in real terms. After adjusting for inflation, the rise in education spending would amount to around 4 per cent,” she notes. This explains why day-to-day school expenditure — salaries, operations and basic learning inputs — has barely moved despite the larger outlay.
A clearer pattern emerges when looking at where the new money goes. Much of it sits in capital-heavy initiatives, from university townships and AI labs to expanded skilling infrastructure. Divya sees this as a deliberate shift.
“The Union Government is focusing on creating skilled and job-ready graduates aligned with current industry standards. Through university townships, there is emphasis on research, industry collaboration and practical learning,” she says. The tilt towards higher education reflects a belief that stronger research and employability pipelines will deliver quicker economic returns than incremental school-level spending.
School education, meanwhile, has received only a marginal rise. Foundational learning remains a structural concern nationally, yet the Budget has placed greater weight on technologies and talent development at the upper end of the system. Divya suggests this may indicate sequencing rather than neglect — a consolidation of higher education capacity before larger pushes in schooling. But it also raises questions about whether the basics are being deferred.
The Budget’s explicit backing of digital learning and AI infrastructure adds another layer to the debate. New labs, digital platforms and content-creation spaces are meant to modernise classrooms, but their impact depends heavily on teacher readiness. “Even one crore AI labs across India would not generate the desired outcome if teachers are not prepared to use them. Balancing professional development with infrastructure delivers better returns,” Divya says. She adds that teachers need incentives and institutional support to integrate new tools meaningfully, otherwise the investment risks becoming ornamental.
Where the Budget appears more closely aligned with outcomes is in skilling. Allocations for apprenticeships and vocational pathways have risen sharply, and industry sentiment has long indicated the need for graduates who require less retraining. “Companies increasingly see upskilling new hires as a burden and prefer graduates who are already job-ready,” Divya explains. The enhanced skilling outlays, in her view, acknowledge this gap and attempt to bridge education with employment more directly.
Yet one long-standing gap persists. Education spending remains around 2.6 per cent of total Union expenditure, far below the 6 per cent of GDP benchmark envisioned in policy documents. Divya attributes this not to lack of intent but to broader fiscal constraints.
“Public spending has never reached the 6 per cent benchmark despite repeated recommendations. The shortfall points to revenue limitations, even though this Budget does show a noticeable increase and a stronger push for infrastructure,” she says. She believes the benchmark should be seen as a trajectory, a goal approached gradually rather than achieved in a single year.
Among the omissions, Divya highlights one relatively modest yet high-impact intervention: reducing GST on online education. “Despite the push for digital learning and technology in education, GST on online education remains at 18 per cent,” she says. Lowering it, she argues, would immediately improve access for students in tier II, tier III and rural regions, which are precisely the groups the Budget aims to empower.
