Stalled Skilling Funds
When I read the budget data showing that the government spent only 5% of the funds allocated for the flagship job and skilling package in FY 2025–26, I felt a mix of frustration and urgency. The headline — that just ₹1,730 crore was spent out of an allocation of ₹33,830 crore — is not only a number; it is a red flag about execution, design and consequences for millions of young people trying to enter the workforce (Govt spent only 5% of funds for job, skilling schemes in FY 2026).
What the package covered — a quick primer
The special package announced in last year’s budget bundled several initiatives: a large internship scheme, an ambitious program to upgrade 1,000 government-run Industrial Training Institutes (ITIs), and several employment-generation and skilling measures designed to reach tens of millions of youth over five years. The overall promise was vast — the program was projected to benefit roughly 41 million youth at a cost of about ₹2 lakh crore over five years.
Yet the actual spending tells a different story. The internship component alone had an allocation of about ₹10,800 crore but saw only ₹526 crore spent in FY26. Pilot rounds attracted hundreds of thousands of applications, but conversion into accepted offers remained low. The gap between paper promises and money-in-motion is worrying.Govt spent only 5% of funds for job, skilling schemes in FY 2026
Why did this happen? Causes I keep coming back to
From my work and past reflections on skilling policy, several recurring causes explain low fund absorption and delayed rollouts:
- Bureaucratic and procedural delays: complex approval pathways for new schemes and pilots slow the release of funds to implementing agencies and states.
- Fund absorption issues at state and implementing levels: many schemes require state co-financing, clear guidelines and administrative capacity that are uneven across states.
- Implementation design challenges: large allocations focused on capital upgrades (infrastructure, equipment) without simultaneously strengthening curriculum, trainer quality and employer linkages reduces speed and impact.
- Demand–supply mismatch: employers may be reluctant to take interns or absorb trainees when skills offered are short-term certificates with limited workplace relevance.
- Pilots that aren’t scaled quickly: small pilot rounds are necessary, but slow transitions from pilot to full-scale implementation mean budgeted funds remain unused.
These are not new observations; they echo points I raised earlier when discussing India’s skilling architecture and the perennial challenge of translating allocations into outcomes (Skills to gain Productivity — my earlier take).
What this means for youth and the economy
The human cost is immediate and the macro cost is persistent:
- Youth disenchantment: promising schemes that do not roll out at scale leave aspirants waiting and can erode trust in public programs.
- Lost productivity: delaying the upgrade of ITIs and internships slows the supply of work-ready entrants just when industry needs them.
- Economic drag: underutilised funds mean weaker short-term demand (from stipend payments, training purchases) and longer-term skills shortages for growth sectors.
- Widening inequality: better-off youth who can afford private training or unpaid internships will move ahead while vulnerable groups miss out.
Stakeholder reactions — a snapshot (paraphrased)
- Government voices emphasise that schemes are being finalised, pilots evaluated, and that ramp-up is planned for the next fiscal year.
- Opposition and critics view the low spend as evidence of poor planning and point to a gap between budget rhetoric and delivery.
- Experts caution that the problem is less about headline allocations and more about operational detail: outcomes measurement, trainer quality, and employer buy-in.
- Beneficiaries — young jobseekers and trainees — report confusion about how to access internships and worry that certificates may not translate into real jobs.
What policymakers should consider now — practical recommendations
I believe urgency should guide both short-term fixes and longer-term reforms.
Short-term (next 12 months):
- Fast-track clear operational guidelines and cut unnecessary approval steps so pilots can scale quickly.
- Release outcome-linked tranches: fund only when milestones (placements, trainer recruitment, curriculum alignment) are met.
- Incentivise employers to take interns through modest wage top-ups or social-security light carrots tied to verified hires.
- Improve transparency: publish timely dashboards on spending, placements and absorptions to allow course correction.
Medium- to long-term:
- Shift focus from quantity of certificates to quality of competency: longer, work-integrated courses and stronger apprenticeship models.
- Invest in trainer training and curriculum modernization alongside ITI infrastructure upgrades.
- Align skilling initiatives with demand signals from industry clusters and employment-linked incentive schemes.
- Use digital tools and AI for scalable, personalised learning while mandating workplace assessments to certify real-world competence.
A final, personal note
I have argued before that skilling is not merely a spending exercise — it is an ecosystem problem that requires coordinated design, industry trust and relentless operational attention (Skills to gain Productivity — my earlier take). The FY26 spending data is a warning: large allocations without an equally large effort on execution risk turning good intentions into missed opportunity. For the millions of young people waiting for their chance, we can’t afford delays. We must move from promises to measurable outcomes — fast.
Regards,
Hemen Parekh
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