Budget 2025: India's education Budget grows, but lags behind global trends

In the Union Budget 2025, the government allocates Rs 1.28 trillion to education, an increase of 6.5 per cent of Rs 1.20 trillion last year

Union Budget 2025-26 allocated Rs 1.28 trillion to the education sector, a 6.5 per cent hike compared to the previous year and the lowest in the past four years.

 

However, the overall spending on education remained below the suggested 6 per cent of Gross Domestic Production (GDP) spendings in National Education Policy (NEP) 2020.

 

Allocated to the education sector was Rs 1.20 trillion in 2024-2025, a 7.14 per cent increase from Rs 1.12 trillion in 2023-2024. The allocation was Rs 1.04 trillion in 2022-2023.

 

Notably, in this year’s Budget, the government announced new initiatives towards improving the quality of education in the country with emphasis particularly on artificial intelligence (AI) and the IITs.

 

“This year, the government’s various schemes for the education sector are a step in the right direction. The budget’s focus on the poor, women, youth, and farmers will ensure a developed India. To turn the vision of Viksit Bharat into reality, streamlining processes and providing subsidies for K-12 education loans is essential. Integrating more technology into education can help bridge the digital divide,” said Anish Shah, CFO, Zee Learn Limited, speaking to Business Standard. 

 

Challenges facing educating spending

While India has made significant strides in improving access to education, challenges remain in terms of quality, infrastructure, and equitable distribution of resources. Over the past decade, India’s education spending has hovered between 3 per cent and 4 per cent of GDP, with fluctuations depending on economic conditions and government priorities.

 

The target of increasing education spending to reach the 6 per cent GDP is crucial for long-term development. While current spending falls short of this target, government expenditure on education has notably increased over the past five years. Comparing the recent allocation with FY19, there was a substantial increase of 51.33 per cent, from Rs 85,010 crore to Rs 1.28 trillion. However, in 2021-22, the allocation decreased by 6.12 per cent due to the Covid-19 pandemic.

 

Trends in education expenditure and growth over the years

(Source: Ministry of Education, Government of India) 

 

  India falling behind major economies

According to the World Bank data, in 2023, the US allocated 6 per cent of its total GDP to education. Meanwhile, neighbouring China allocated slightly more, dedicating 6.13 per cent of its GDP to education during the same period. 

 

Germany directed 4.6 per cent of its GDP toward primary and tertiary education (excluding R&D), a decrease from the pre-Covid-19 era when its budget for education, research, and science stood at 9.8 per cent of GDP, according to Germany – Education at a Glance 2023. 

 

Japan invested 7.43 per cent of its GDP in education. In contrast, India allocated only 4.6 per cent of its total GDP to education in its interim Budget for FY25.

 

Other announcements

Finance Minister Sitharaman announced a major boost for IITs and skill development. IIT student numbers have doubled in a decade, prompting infrastructure expansion in five post-2014 IITs to accommodate 6,500 more students. 

To equip youth for global opportunities, five National Centres of Excellence will focus on upskilling through global expertise. Additionally, a Centre of Excellence in AI for Education will be established with an initial Rs 500 crore investment. 

“The Union Budget’s emphasis on expanding Atal Tinkering Labs, AI-driven education, and broadband connectivity in government schools is a decisive step toward future-ready learning. Establishing a Center of Excellence in AI for Education with a Rs 500 crore outlay will accelerate digital learning and skill development, ensuring students are well-versed in emerging technologies and globally relevant competencies,” said  Sujatha Kshirsagar, president, Career Launcher.