Authors: Aamani Bhardwaj, Maria Martinez, Gauri Khanna, Folashade Ruth Abayomi-Mighty, Navani Sana, Swetna Mago Bhatia, Adewale Ademola Joshua, & Aminat Temilola Shaibu Introduction The nation that takes pride in being one of the only four countries to send a probe to the lunar surface and in which India made the pathbreaking discovery of water molecules on the lunar surface, and which has been home to universal education institutions like Takshila and Nalanda today stands with figures like these: India’s contribution to its educational needs still stands at around 3% of its GDP while the National Policy on Education 1968 and 2020 both recommend increasing public investment on education to 6% of GDP. It is concerning that as a proportion of the total budget outlay (₹53.5 lakh crore for 2026-27), education accounts for about 2.6%, down from around 3% in earlier budgets like 2019-20 (Karthika, 2025). Moreover, India’s literacy rate 77.7% nationally, with a persistent gender gap (84.7% for men versus 70.3% for women) and a state-level range from 96.2% in Kerala to 66.4% in Andhra Pradesh remains far from a uniformly “ideal” level across states (International Institute for Population Sciences [IIPS] & ICF, 2021). This paper aims at looking at what lies behind this constant gap in the demand, supply, allocation and optimum spending of the budgetary allowances. Is the real problem that the education allowance has never been 6% of the GDP, the recommended percentage? Or is it also that whatever amount is allocated never gets spent in the right manner, and on the right things, at the time when it would have most impact? Where do the allocated funds go if not spent on recommendations made? Why is the school dropout rate still very high in secondary years? The secondary-level dropout rate, while it fell from 13.1% in 2018 to 7.9% in 2024, remains nearly three times the rate observed at the elementary level (8.2% versus roughly 3%) and continues to affect girls disproportionately (8.1%) (ASER Centre, 2025; Department of School Education and Literacy, 2025). Can just higher allocation of funds resolve these issues? The problem lies much deeper. Young girls disproportionately drop out to take on household chores cited by roughly 42% of girls who leave school or because safe transport to school is unavailable, among the leading reasons for female discontinuation identified in national surveys on school non-attendance (Ministry of Statistics and Programme Implementation, n.d.). What will eventually bring about the major mindset shifts? There has been a visible effort by governments year after year, but the gaps don’t seem to lessen. The primary research objective of this report, is thus, to examine the extent of budgetary expenditure gaps in the Indian education system. This will be done by identifying the core reasons of why educational funds are underutilized in the first place. Secondly, this report will assess the impact of expenditure gaps on educational development how this expenditure inefficiency is actually demonstrated by on-ground realities of poor infrastructure, lack of resources and other similar deficiencies. Third, using a top-down approach, this report shall address administrative, institutional and policy-related bottlenecks affecting expenditure while also proposing policy recommendations for improving fund utilization and implementation efficiency (Upadhyaya, 2025; Mehta, 2025). While much of the existing scholarship on educational financing concentrates on allocation patterns, this report shifts focus to expenditure effectiveness examining not merely how much is budgeted, but how efficiently those resources are actually deployed. The report also explores the direct link between policy implementation and expenditure outcomes and provides recommendations targeted specifically at reducing leakages, delays and underutilization of resources (Motkuri & Revathi, 2024; School Education in the Union Budget 2026, 2026). The structure of the research report is as follows: An overview of educational financing in India and the larger background of public spending on education is given at the very outset. The policy framework that governs educational financing is then established by looking at significant educational policies and patterns in government spending. Building on this framework, the study looks at the many kinds of budgetary spending gaps and their causes, focusing on institutional, administrative, and policy-related constraints. The key findings are then analysed in terms of how they impact both the efficiency of spending and the progress of education. The study offers legislative recommendations and grassroots solutions before concluding with the macro implications of improving financial efficiency and accountability in the education sector. This brings us back to the central research question guiding this research report: what are the structural, administrative, and institutional factors driving the persistent gap between budgeted allocations and actual expenditure in India’s school education sector, and how does this underutilization shape educational outcomes? Literature Review Public expenditure on education leads to individual development and collective economic benefits. The National Education Policy of India 2020 outlines the vision of the new education system in India (Nandini, 2020). There were several policies implemented since Independence to transform the education sector. Central government donates to education in two ways, namely, centrally supported schemes and central sector schemes. The Kothari commission in 1966 recommended that public expenditure should reach the level of 6% of the Gross Domestic Product. Then the Saikia Committee of 1966 stressed the need for expenditure of 6% of the GNP. The Right to Education Act gave shelter to many deprived students to pursue education, and it mandates that schools reserve 25% of positions in their admissions (Khaitan, 2021). Educational spending increased from 2.8% of GDP in 2014-15 to 3.1% in 2019-20 (Ansari & Khan, 2018), who examined the level, trend, and growth of public expenditure on education in India. Financial constraints are widely cited as a primary reason for the failure to achieve key educational targets. Historically, State governments are the primary funders of public education. Systemic bureaucratic leakage and unspent funds often distort the perceived progress of educational funding (Comptroller and Auditor General of India, 2025; Foundation for Responsive Governance, 2026). Sector-wise distribution sheds light on the equitable allocation of resources across primary, secondary, and higher education (Kumar,
