DECLINING EDUCATION EXPENDITURE: IMPACT ON INDIA'S YOUTH AND DEMOGRAPHIC DIVIDEND

Why In News?

The Ministry of Education's share in the Union Budget has halved from 4.6% in 2013-14 to 2.5% in 2025-26, showing a decline in priority, sparking intense debates on India's human capital development.   

Key Findings on Education Financing

Low Public Spending: Combined Centre + State expenditure on education remains around 4.1% of GDP, below the NEP 2020 target of 6%.

Declining Budgetary Priority: While the Union Education Budget increased to ₹1.39 lakh crore (2026–27), infrastructure sectors such as transport have witnessed faster expenditure growth over time.

Wide Interstate Disparities: Educational outcomes differ across states. Kerala's secondary GER is about 98.1%, while educational indicators in several low-income states remain lower, reflecting unequal financing and capacity.

Concurrent List Responsibility: Under the Seventh Schedule (Concurrent List), both the Union and States share responsibility for financing and governing education.

Research Funding Gap: Only 47% of allocated research and innovation funds were utilised on average between 2017–18 and 2024–25, limiting research output.

Teacher & Infrastructure Deficit: India has 14.71 lakh schools, 24.69 crore students and about 1 crore teachers, but shortages of digital infrastructure, quality teachers and inclusive facilities persist.

Need for Foundational Learning: NITI Aayog (2026) identifies foundational literacy, teacher quality, governance reforms and AI-enabled learning as priority areas requiring sustained investment.

Importance of Education Spending

Human Capital Accumulation: Education builds a skilled workforce for Industry 4.0. India has a 5.8 million-strong technology workforce (largest after the US), but sustained investment is essential for AI, semiconductors and digital technologies.

Demographic Dividend: India has one of the world's youngest populations. However, only about 26% of youth (15–29 years) have received formal vocational education/training, underscoring the need for higher investment in skilling.

Inclusive Development: The PM POSHAN scheme provides nutritious meals to 11.2 crore children, improving nutrition, attendance and retention, particularly among disadvantaged groups.

Global Competitiveness: Indian Higher Education Institutions contribute only ~9% of India's R&D expenditure, far below leading innovation economies, highlighting the need for greater research funding.

Improves Learning Outcomes: Better funding enhances teacher quality, digital classrooms, libraries, laboratories and foundational literacy, as emphasised in the NITI Aayog School Education Report (2026).

Supports NEP 2020 Goals: Increased investment is critical for achieving 100% school GER and 50% Higher Education GER by 2035, besides implementing multidisciplinary education and vocational integration.

Boosts Employability & Productivity: Investment in education raises labour productivity, employability and income levels, supporting India's transition to Viksit Bharat 2047.

Promotes Equity & Social Mobility: Public expenditure reduces regional, gender and socio-economic disparities by expanding access to quality education for SCs, STs, OBCs, girls and economically weaker sections.

Strengthens Innovation Ecosystem: Greater funding for universities, Anusandhan National Research Foundation (ANRF), IITs and research institutions accelerates patents, startups and indigenous technology development.

Higher Long-term Economic Returns: Global evidence shows that investment in education improves GDP growth, human capital and HDI, making it one of the highest-return public investments.

Concerns Arising from Declining Expenditure

Infrastructure Deficits: In government schools, only 32% have Children with Disabilities (CwD)-friendly toilets. 

• Rural access remains weak, with only 17% of rural schools offering secondary education compared with 38% in urban areas, widening regional disparities.

Deteriorating Learning Outcomes: PARAKH Rashtriya Sarvekshan found that average learning levels in language and mathematics decline in higher grades, indicating persistent foundational learning gaps despite improved enrolment.

Research & Innovation Bottlenecks: Schemes such as MERITE and research grants continue to face low fund utilisation, while Indian universities contribute only 7% to 9% of national R&D expenditure, limiting innovation and global competitiveness.

Skill Gaps & High Dropouts: The secondary-school dropout rate is about 11.5%, largely due to economic hardship, domestic work and early entry into low-skilled jobs, while inadequate laboratory and vocational infrastructure weakens employability.

Digital Divide: Unequal access to internet, computers and digital devices, especially in rural and tribal regions, limits the effectiveness of digital learning initiatives such as DIKSHA and SWAYAM.

Key Government Initiatives

National Education Policy (NEP), 2020: Targets 100% Gross Enrolment Ratio (GER) in school education and 50% GER in higher education by 2035, with emphasis on multidisciplinary learning, vocational education and digital transformation.

Samagra Shiksha: Budget allocation of ₹42,100 crore (2026–27) to support pre-school to Class XII, covering infrastructure, teacher training, ICT, inclusion and quality improvement.

PM SHRI Schools: Allocation of ₹7,500 crore to develop 14,500 PM SHRI Schools as model institutions implementing NEP 2020 through smart classrooms, digital labs and green campuses.

National Research Foundation (NRF)/ANRF: Strengthens India's research ecosystem through competitive funding, interdisciplinary research and support for AI Centres of Excellence and innovation in higher education.

Digital Learning Platforms: SWAYAM has crossed 4.8 crore course enrolments, while DIKSHA provides multilingual digital learning resources for teachers and students across India.

NIPUN Bharat Mission: Aims to achieve Foundational Literacy and Numeracy (FLN) for all children by Grade 3 by 2026–27.

PM POSHAN Scheme: Provides nutritious mid-day meals to 11.2 crore children, improving attendance, nutrition and retention.

National Credit Framework (NCrF): Enables academic, vocational and skill credit integration, promoting lifelong learning and flexible education pathways.

Academic Bank of Credits (ABC): Facilitates multiple entry and exit in higher education under NEP 2020, enhancing flexibility for students.

Skill Hubs in Schools: Integrates vocational education with school education to improve employability and align education with industry needs.

PM eVIDYA & One Nation One Digital Platform: Expands digital education through TV channels, online learning and multilingual content, ensuring continuity of learning.

Way Forward

Commit to the 6% GDP Target: The Centre and States should progressively raise public expenditure on education from the current 4.1% of GDP to the 6% target recommended by the NEP 2020.

Outcome-Oriented Budgeting: Shift from measuring fund utilisation to tracking learning outcomes, Foundational Literacy and Numeracy (FLN), employability, GER and research output through performance-based financing.

Upgrade School Infrastructure: Invest in AI-enabled laboratories, smart classrooms, digital libraries, STEM labs, internet connectivity and inclusive infrastructure, especially in Tier-2, Tier-3 and aspirational districts.

Maximise Research & Innovation Funding: Ensure full utilisation of MERITE, ANRF/NRF and university research grants while encouraging industry-academia collaboration, patents and innovation ecosystems.

Expand Early Childhood Education: Strengthen Balvatikas, Anganwadis and pre-primary education under the 5+3+3+4 NEP framework, improving school readiness.

Bridge the Digital Divide: Provide affordable devices, broadband connectivity and digital learning resources for rural, tribal and economically weaker students.

Increase Higher Education Autonomy: Provide universities with greater academic and financial autonomy, linked to measurable improvements in teaching, research and innovation.

Promote Public–Private Partnerships (PPP): Encourage responsible private investment in research parks, digital infrastructure, incubation centres and skill universities, while maintaining equitable access.

Strengthen Monitoring & Data Systems: Develop real-time education dashboards to monitor teacher vacancies, school infrastructure, learning outcomes and budget utilisation, enabling evidence-based policymaking.

Improve Inclusion: Expand targeted support for girls, SCs, STs, OBCs, minorities, Children with Disabilities (CwDs) and aspirational districts through scholarships, assistive technologies and accessible infrastructure.

Align Education with Future Jobs: Increase investment in AI, robotics, semiconductors, green technologies, cybersecurity and digital skills to meet emerging labour-market demands and support Viksit Bharat 2047.

Conclusion

Treating education as critical national infrastructure and rapidly scaling public investment to 6% of GDP remains non-negotiable for India to successfully reap its demographic dividend and secure sustainable human capital development.

Source: INDIANEXPRESS