India’s national education budget 2024/25

Following national elections in India this year, the elected government which started its third five-year term in June  2024 released the national budget for 2024-25. The economic outlook continues to be strong and resilient with the growth projection estimated to be 7 per cent according to the latest IMF projections.

The national education budget, covering both school and higher education, has received one of the largest allocations in many years with total funding of around £12 billion, an increase of around £1 billion over last year. In percentage terms, the education budget constitutes 2.5 per cent of the total year’s national spending allocation. This figure does not include state-level spending on education, which makes up a large proportion of total government education spending.

The budget emphasises four key themes: Employment; Skilling; Micro, Small and Medium Enterprises (MSME); and the Middle Class. The Skills budget has received a big financial stimulus of £450 million (an increase of 38 per cent over last year’s revised estimates) as well as new schemes to address issues of employment and making young Indians employable.

 According to ILO’s India Employment Report 2024, the unemployment rate among educated youths (grade 12 completers and higher level) was 18.4 per cent in 2022, exceeding global average. Given India’s demographic bulge, there is a mismatch between the increasing number of educated young people entering the workforce each year and a lack of work opportunities, which presents an enormous challenge. In that respect, the budget introduces a new package of five initiatives aiming to facilitate employment, skilling and other opportunities for 41 million youth over a 5-year period.

This initiative includes incentives for the private sector in creating additional jobs in the manufacturing and service sectors, encouraging young people to join the formal economy, internship opportunities to join top companies, initiative to facilitate the participation of young women in the workforce (which currently stands at only 25 per cent), and upgrading skills training institutions across the country. These projects have a combined central outlay of £20 billion, which has been pooled from different sectoral budgets held by their respective ministries. Convergence and coordination between ministries has always been a challenge, so it will be interesting to see how outcome and performance is reported against the package. 

India has 265 million students in school, 43 million in higher education and more than 110 million learners enrolled in skilling institutions. This makes India the largest education system worldwide if all levels of study are considered.  The country has 1.7 million schools, 1,168 universities and over 45,000 colleges and standalone institutions, employing 9.5 million school teachers and 1.6 million teaching staff in higher education.

School education has historically always made up a larger share of the central government’s education budget, in the ratio of 60 per cent to 40 percent for higher education. The school education outlay which has grown at 6.1 per cent from previous year, accounts for 61 per cent of national-level education spending while higher education is 39 per cent of the total national budget outlay.      

The higher education budget increased by 8 per cent over last year’s budget estimates but was 16 per cent lower than the revised spending estimates for 2023-24.

Education funding is increasingly dependent on cess, which is an additional tax surcharge earmarked exclusively for education. Money from this tax now funds almost 74 per cent of the school education budget and 33 per cent of the higher education budget.  

Areas that received an increased budget outlay in higher education

• Digital e-learning, primarily the higher education data system and Academic Bank of Credit - a government initiative to increase credit portability and give students more flexible study options and the new National Digital University.  The government looks set to tap the potential of online education and align it with the academic credit banking system which has also received a big budget increase so that the efforts are complementary.  This is intended to permit students to choose courses in different formats based on credit system and will offer flexibility to move between academic education, vocational education and employment.
• Research and Innovation, particularly programmes that focus on academic and research collaborations in science, engineering and technical education. Further, a setting up of corpus fund of £10 billion to boost research and innovation.  Fifty-year interest free loan to financial institutions will be provided in sunrise sectors. Under this fund, the interest earned would be disbursed whilst the principal amount stays untouched. Further push to implement of the National Research Fund for basic research and prototype development which has been announced in 2022-23 budget
• Increasing uptake of apprenticeships in higher education and better implementation of the ongoing programme
• Teacher Training, whose allocation has gone up from £4.5 million to £10 million. The programme seeks to consolidate and strengthen on-going programmes related to teachers and teaching through effective coordination. It will also enhance institutional infrastructure for pre-service and in-service teacher training.
• Centre of Excellence in Artificial Intelligence, whose budget has increased by more than seven times over the previous year’s figure, reaching £25.5 million. It will establish three CoE in top educational institutions for conducting interdisciplinary research, developing cutting-edge applications and scalable problem solutions in the areas of agriculture, health and sustainable cities.
• Increased funds to a few specific higher education institutions.  These include 10 Institutions of National Importance, 10 Institutions of Eminence, Central Universities, IGNOU - Indian’s open and distance education university, Indian Institute of Science, Education and Research, Indian Institute of Science, Indian Institute of Technology, Indian Institutes of Information Technology (including a push for setting up new IIITs through public-private partnerships), and the National Institute of Technology.

Other key observations

The budget for the Indian Institutes of Management has been reduced, and a cut of over 50 per cent has been made to the University Grants Commission (UGC), the domestic higher education regulator. The latter change is part of a realignment, where the funding that used to go from UGC to Central Universities will now be directly disbursed to them.

Dedicated research funding for Social Sciences has been excluded and will be a key challenge for domestic HEIs given limited options to explore.

A new education loan scheme has been introduced following consolidation of three existing scholarships and loans schemes, with significant financial top up.  This would help young people with financial support for subsidised loans up to £10,000 for higher education in domestic institutions, with a guarantee provided by the government.

The Equalisation Levy of 2% on digital companies, online education-providing firms, and software-as-a-service providers without a permanent physical presence in India will be abolished from 1 August 2024. These changes are in line with India moving to the OECD global taxation system.