India’s Education Bet was on Access. The AI Economy Demands Outcomes

A decade of access-led education spending has expanded schools, colleges, and enrollment across India’s public education system. With the Union Budget due on 1 February, attention is turning to whether that expansion is producing graduates equipped for an economy being reshaped by artificial intelligence.

Last year’s allocations set the context for this year’s expectations. The Ministry of Education received ₹1.28 trillion (about $14.1 billion today), a 6.22% increase over the Budget Estimates for 2024–25. The allocation signaled continuity in priorities such as school infrastructure, digital connectivity, elite higher education, and skilling, while also sharpening focus on areas such as artificial intelligence, research, and industry-linked learning.

Union Education Minister Dharmendra Pradhan pointed to a renewed focus on innovation at the school level. Among the key announcements was a plan to establish 50,000 Atal Tinkering Labs in government schools over five years, aimed at expanding access to hands-on learning in science, technology, and problem-solving across secondary education.

The Budget also proposed broadband connectivity for all government secondary schools under the BharatNet program, a move intended to narrow persistent digital access gaps between urban and rural learners.

At the higher education level, expansion has been substantial. Student enrolment across India’s 23 Indian Institutes of Technology (IITs) has roughly doubled over the past decade, rising from about 65,000 to around 1.35 lakh. Additional capacity is being added at the five IITs established after 2014 to accommodate another 6,500 students, while hostel and academic infrastructure at IIT Patna are also slated for expansion. Together, these investments underline the government’s continued emphasis on strengthening top-tier institutions.

As Budget 2026 approaches, however, education leaders and entrepreneurs argue that the next phase must move beyond capacity creation.

From Access to Outcomes

“As Budget 2026 approaches, the education narrative is rightly shifting from expanding access to strengthening outcomes,” says Nishant Chandra, Co-founder, private tech institute Newton School of Technology. India’s higher education enrolment has crossed 43 million students, and the Gross Enrolment Ratio stands at 28.4%, up from about 21% a decade ago.

“But capacity and learning quality have not kept pace with this growth, particularly in higher education infrastructure and faculty preparedness,” he adds.

Last year’s Budget acknowledged that gap. Roughly ₹50,000 crore ($6 billion) of the education allocation was directed toward higher education, alongside the announcement of a ₹500 crore Centre of Excellence for AI in Education. Conceived as the fourth national AI Centre of Excellence, the initiative is intended to improve learning outcomes across stages of education while addressing inefficiencies and inequities in delivery.

“These were necessary steps. The next phase has to be about execution,” Chandra says.

The urgency is reflected in employability data. India produces more than 1.5 million engineers each year, yet multiple national assessments suggest that only around half are considered employable in industry-ready roles. Even as demand rises for skills in applied technology, systems engineering, and AI-related functions, curricula, faculty training, and industry exposure have struggled to keep pace.

Learning Infrastructure

For Budget 2026, expectations are converging around three broad priorities. The first is infrastructure, not simply physical expansion, but learning environments designed to support modern pedagogy.

“Modern labs, maker spaces, and shared digital and compute facilities are critical,” Chandra says. “Not just classrooms.” As technology education becomes more compute-intensive, institutions increasingly require access to cloud resources, datasets, and simulation tools that remain out of reach for many public colleges.

The second priority is tying implementation of the National Education Policy to outcomes. While the policy promotes flexibility, multidisciplinary learning, and project-based assessment, education leaders argue that public funding must now be linked to measurable results. Institutions that successfully integrate internships, industry projects, and applied learning, they say, should be rewarded with greater autonomy and sustained support.

The third pillar is faculty readiness. Industry adjunct faculty, structured exposure to industry practices, and continuous professional development are increasingly viewed as necessities rather than optional enhancements.

Skilling for a Shifting Workforce

Skilling is expected to remain central to Budget 2026. Last year, the government announced five National Centers of Excellence for skilling, developed with global partners to support curriculum design, trainer development, certification frameworks, and periodic review mechanisms. These initiatives align with the broader “Make for India, Make for the World” manufacturing strategy.

In parallel, ₹20,000 crore ($2.4 billion) was allocated for private-sector-led research, development, and innovation, while the PM Research Fellowship scheme proposed 10,000 fellowships over five years to strengthen technological research at the IITs and the Indian Institute of Science.

Building on this momentum, Abhimanyu Saxena, Co-Founder of upskilling platform Scaler, argues that the next Budget must place skilling at the center of India’s growth strategy. “In an AI-led economy, one of the biggest challenges for industry is the shortage of talent with applied, job-ready skills,” he says.

Saxena points to the growing importance of continuous upskilling, where employability depends less on static qualifications and more on sustained relevance. He hopes Budget 2026 will encourage greater corporate investment in workforce reskilling, alongside tax incentives for individuals investing in professional education.

“A meaningful increase in allocations for digital infrastructure will also be essential to ensure technology-enabled learning reaches students across regions,” he adds.

Rethinking Education Models

Beyond funding levels, some founders are calling for deeper structural reform. Naveen Mahesh, Founder of alternative education startup Beyond 8, notes that globally, education systems are gradually moving away from rigid, linear models toward approaches that place outcomes and employability at the center.

“Employers are placing greater value on demonstrable skills and real-world competence than on traditional credentials alone,” he says. “If India does not accelerate this transition, we risk lagging behind.”

Mahesh argues that Budget 2026 offers an opportunity to shift emphasis from degrees to employability by liberalizing teaching models, supporting alternative forms of training, and providing regulatory clarity for institutions that prioritize workforce outcomes over examination scores.

“Initiatives like Beyond 8 show what is possible, but isolated examples are not enough,” he says. “We need scale, policy backing, and sustained funding.”

Equally important is addressing the expectations of India’s Gen Z workforce, which is entering the labor market amid rising education costs and economic uncertainty. 

Saxena points to the need for improved tax relief for young earners, better access to affordable education finance, and stronger support for careers in startups, digital businesses, and the gig economy.

“Giving this generation financial flexibility and credible pathways to growth will be central to sustaining India’s demographic advantage,” he says.

The Road Ahead

India has succeeded mainly in expanding access to education. The next challenge is ensuring that public spending translates into skills, employability, and outcomes that matter in a technology-driven economy.

Whether through technology-enabled learning, industry-aligned skilling, or alternative education models, Budget 2026 may mark a shift from expansion to execution, and from intent to impact.