Amid renewed emphasis on skilling, employability, digital learning, and creator economy, the Union Budget 2026 has proposed to raise education spending from ₹1.28 lakh crore in 2025 to ₹1.39 lakh crore. Much of it has been allocated for capital-heavy initiatives, from setting up university townships and AI labs to expanding skilling infrastructure, with a focus on higher education.
Chartered Accountant Dr Divya Abhishek says the government has made its intent clear about the approach it wants to take. “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.
She argues that the tilt towards higher education in this Budget reflects a belief in the policy circles that stronger research and employability pipelines will deliver quicker economic returns, than incremental school-level spending.
She also notes that the increased sectoral allocation may look significant at the first glance, but the real question is whether the rise marks a change in policy direction or simply keeps pace with rising annual costs. “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 four per cent,” she says.
Many observers note that successive Budgets have tended to downplay school education in favour of higher and technical education. In fact, this has been a criticism of the education policy since the time of the Independence. This Budget continues with the trend and has given only a marginal hike to school education. Abhishek suggests this may indicate sequential preference of the government rather than neglect of a particular sector. She says that the government seems to be choosing a consolidation of higher education capacity before larger pushes in schooling are made at the grassroots.
On the innovative side, the Budget’s explicit backing of digital learning and AI infrastructure adds another layer to the debate. On the face of it, this policy intervention seems not just novel, but need of the hour too. But, it also has a bottleneck. New laboratories, digital platforms, and content-creation spaces are meant to modernise classrooms, or even take education out of the classrooms, but their success lies in readiness among teachers. “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,” Abhishek 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 training at workplaces. “Companies increasingly see upskilling new hires as a burden and prefer graduates who are already job-ready,” she 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 at the low level of around 2.6 per cent of the total Union expenditure, far below the six per cent of GDP benchmark envisioned in policy documents and backed by global research. Abhishek attributes this not to a lack of intent but to broader fiscal constraints. “Public spending has never reached the six 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, Abhishek 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 and Tier III cities and rural regions, which are precisely the groups the Budget aims to empower.