Co-authored by

Saniya Mansoory , Shaleen Shekhar , Sabana Parveen, Unnitaa Goswami, Ishmeet Kaur, Avani Vaishnav , Anoushka Sinha

Abstract

India’s education system still faces many challenges, although the budget allocations have increased in the Post-NEP 2020 period, the actual expenditure consistently does not meet the goals. This paper studies the budget-to-expenditure gap in India’s education sector throughout the Pre-NEP period (FY 2018-2019 to FY 2019-20) and the Post-NEP Period (FY 2021-22 to FY 2025-26). Using a comparative and detailed research design, based completely on official and verified sources including Union Budget documents, Parliamentary Standing Committee reports, CAG Audits, and PRS Legislative Research and analyses, the study examines and analyses fund allocations, release and usage patterns at national level and also compares two states, Kerala and Jharkhand, on fiscal capacity and implementation statistics. The evidence suggests that despite a 29.5% increase in Ministry of Education allocations, public expenditures remain at 4.1% of GDP against the NEP target of 6%. Scheme-level data shows average utilisation of 86% under Samagra Shiksha, masking important differences between states and inefficient use of funds during the year. Governance failures, delayed funds, and weak monitoring emerge as structural causes of the gap. The paper argues that increasing funding alone is not enough. There should be effective implementation, proper allocation, release of funds, effective spending and achieving targets.

Keywords: Budget-to-expenditure gap, school education, NEP 2020, fund utilisation, Samagra Shiksha, public expenditure management, governance failures, fiscal federalism, Kerala, Jharkhand.

Introduction

The Indian education sector still has major gaps. Despite increasing budget allocations, much of the funding remains unspent and underutilised. In 2023-24, the Central government got a shortage of ₹7,539 crore for its targeted education expenditure for the year, only ₹1.08 lakh crore were spent against the allocated ₹1.16 lakh crore (The Print, 2024)

NEP-2020 promised transformation, demanding 6% of GDP for education. The Ministry of Education’s allocations increased from ₹99,311 crore (2020-21) to ₹1,28,650 crore (2025-26), a 29.5% rise (Ministry of Education, 2026). Although spending sits only at 4.1% of GDP (PRS Legislative Research, 2026).

Problem Statement: India continues to experience significant budget-to-expenditure gaps in school education, even after increased budget allocations Post-NEP 2020. Major schemes are short on fund fund utilisation and delays in spendings over the years. According to a media report of India Today 2025, only 16 of 28 states had partially adopted it by mid-2025, NEP-2020 implementation still remains uneven.

Importance of the Study: This research is done through three critical lenses. First, policy relevance; NEP 2020 recommends a 6% GDP investment, yet combined centre and state education spending remains at 4.1% (PRS Legislative, 2026), creating a gap essential for achieving NEP targets. Second, governance accountability: ₹ 7,539 crore unspent in 2023-24 (The Print, 2024). 

This shows a systematic administrative issue that requires immediate attention. Third, equity implications: disparities between states with different fiscal and educational contexts, such as Kerala and Jharkhand create educational inequality that this study analyses through a comparative lens.

Research Questions:

How has the gap between the education budget allocated and the actual expenditure changed before and after the implementation of NEP-2020?

How have Kerala and Jharkhand performed in allocating, using and spending education funds under NEP-2020?

Research Objectives:

Analyse the pattern of budget allocation and expenditure in India’s school education sector across the pre-NEP and post-NEP periods.

Assess the extent of budget-to-expenditure gaps during FY 2018-19 to FY 2025-26.

Compare Kerala and Jharkhand in terms of NEP implementation, budget utilisation, and expenditure outcomes.

Examine the major reasons behind underutilisation of education funds, including administrative inefficiency, delayed fund release, and planning gaps.

Suggest policy measures for improving fund utilisation and ensuring effective NEP 2020 implementation.

Scope of Study: This study covers FY 2018-19 to FY 2025-26, with reference to FY 2026-27 budget estimates where available. Geographically, it examines Union-level data and two states: Kerala and Jharkhand. Sectorally, it covers school education under the Ministry of Education, with focus on Samagra Shiksha, PM Poshan, and PM SHRI. Data is drawn from Union Budget documents, Ministry expenditure reports, parliamentary committee reports, and CAG audit findings.

Literature Review

As we know, funding schooling is not an easy decision at budget time in India. As an alternative, it is a series of management of public expenditure which includes funds being released, actual expenditure, delivery of the programme and student learning outcomes. If the series is weak, it can have a rendering effect of the well meant policy objective being unsuccessful. 

This literature review blends already published work covering four areas of connection to the present inquiry which is the fairness and efficiency of financial education in India and implication of its cost of the NEP (National Education Policy), implementation gaps under scheme level, differences in institution and inter state fiscal.

Public Financing of School Education: fairness and efficiency

Rout Singh, Kundu, and Rehman ( 2016) carried out a study on the Pre-NEP period and literature based on public finance in India. Three co-dependent questions were discussed in their work. First, is the total budget in India that is spent on education sufficient in scale or not? The second being the question whether the different areas and demographics receive the fairly distributed funds. And lastly, does this investment yield a successful educational result? It is argued by the authors that while total spending on education in India has grown in accordance with the standard of living of the population with inflation, it failed to grow enough to actually satisfy the quality improvement or a big scale reform of the school education system in India. This key difference between scale and better expenditure in India also guides the focus of this study.Their argument rests on aggregate national spending trends which is also its limitation as an economy wide average cannot show where the shortfall is concentrated. 

It is further argued that in addition to having financial resources for the school education system, it should also have efficient budgeting release, better investment in school resources and infrastructure, qualified staff, and better systems for monitoring, all of this dependent on the efficiency of the expenditure.

These problems have been highlighted and underscored in the report released by PRS Legislative Research Report (2026), which emphasizes that the combined spending of the centre and state on education was estimated at 4.1% of the GDP in the year 2022-23 and was well falling short of the set target of NEP 2020 which was 6% target by NEP 2020. Additionally, the absorbed fund under the Samagra Shiksha initiative was averaged at only 86% over the past years, which implies that there is a continued underutilization of the given financial allocation. These similar problems of underinvestment, merged with under utilisation, together highlights that education financing in India is insufficient with a significant amount of available money being unused or deployed inefficiently throughout the year. 

NEP 2020 and the Financial Imperative

Samtani and Bhagavatula (2022) characterize NEP 2020 as a reform agenda and a financing challenge. They say the ambitions of the policy – restructuring the school system, expanding early childhood education, modernising infrastructure, retraining teachers and integrating digital learning – cannot be achieved without a significant and sustained increase in public investment. Their analysis is particularly useful in that it does not consider NEP 2020 as a self-implementing policy. Instead, they foreground the question of whether financial commitments will follow policy commitments, and whether the institutional capacity exists to absorb and utilise increased funding effectively.

Budget data bears out this concern. Ministry of Education (MoE) had been allotted Rs 1,28,650 and Rs 1,39,289.48 crore for FY 2025-26 and FY 2026-27 respectively and Department of School Education and Literacy had been allotted Rs 78,572 and Rs 83,562.26 respectively (Press Information Bureau, 2025, 2026). These are allocation not expenditure and though figures represent nominal growth. It is being considered that allocation is the first of the analyses and not the last one. 

A further step is taken by Kumar and Singh (2025) who identify the ongoing implementation challenges faced by the Indian education sector five years post implementation of NEP2020; which include inadequate infrastructural support, teacher shortage, increasing digital divide, state financial challenges and unequal implementation in various states. As of mid 2025, only 16 out of 28 states in India have partly completed NEP adoption (India Today, 2025). indicates the geographical spread of the policy is uneven which supports Kumar and Singh’s implicit thesis that national budgetary growth cannot bypass state level administrative deficits.The findings are important for this paper as they show that higher national allocations do not necessarily overcome state-level execution deficits. Reality at the state level and national setting are often far apart.While Samtani and Bhagavatula identify the problem of fiscal input, Kumar and Singh reveal it as a problem of institutional output.

Scheme-Level Implementation: Samagra Shiksha, PM POSHAN, and PM SHRI

As the leading scheme in school education from pre-primary to Class 12 (implemented in 2018–19), Samagra Shiksha has been the main vehicle to examine the budget-execution gap both before and after the NEP 2020 has been initiated. Merged into a single framework from prior schemes (SSA, RMSA, teacher education), this programme embodies the inclusive, equitable, efficient, and learning-centric aims of the NEP, along with its focus on teachers and infrastructure development. As a centrally sponsored scheme, its implementation is inherently linked to the centre and state governments, which require approval of funds, release, matching, expenditure, and accounting. Each of these layers presents numerous junctures for delays that affect the gap.

Budget figures for Samagra Shiksha itself demonstrate a modest increase: ₹37,453.47 crore (FY2023-24), ₹37,500 crore (FY2024-25), ₹41,250 crore (FY2025-26) and ₹42,100 crore (FY2026-27) – or ₹4,600 crore increase between FY2024-25 and FY2026-27. Importantly, this is a set of budget estimates and should not be confused with the actual spending or the final Utilisation Certificates (UCs) issued. This latter mix is arguably the most common pitfall in the literature on educational finance.

According to Parliamentary standing committee data (Parliament of India, 2026), the budget estimate of ₹41,250 crore, by February 13, 2026, for the Samagra Shiksha for the year 2025-26. The expenditure recorded was ₹22,633.88 crore, which was 54.9% of utilisation. This in-year utilisation needs to be interpreted carefully, as it indicates that in-year spending is heavily skewed towards later months in the fiscal year. Similarly at state level, unspent closing balance under SSA in Karnataka has hovered between ₹94.08 crore and ₹1,026.83 crore between FY2017-18 and FY2021-22 (CAG, 2024). Similarly, only 44 per cent and 50 per cent of the SSA budget were utilized in Odisha from 2018-23 (CAG, 2025). Non-preparation of mandatory perspective plans and district annual action plan and budgets (DRBs) for five consecutive years in Goa is indicative of serious non-adherence to plans which is bound to affect implementation (CAG, 2022).

PM POSHAN represents similar concerns. FY2025–26 had projected a budgetary estimate of 12,500 crore ₹ which was subsequently scaled down to 10,600 crore ₹, against which by Feb 13, 2026, it stood at 6,639.22 crore ₹ (Parliament of India, 2026). A report by Accountability Initiative (2023) further mentions that by December 31, 2022, for FY 2022-23, out of the budgetary allocations to states and UTs, only 52 per cent were released. Delay in fund release, and not just delay in spending, is another source of the execution gap. PM POSHAN’s role as an important scheme which directly influences attendance, retention, and learning necessitates swift action in releasing funds.

The recently launched PM SHRI, approved in 2022 and to be implemented between FY2022-23 and FY2026-27 is the most direct and post-NEP reform programme targeting schools, selecting a few to serve as model schools of the NEP standards. As this programme is not fully covered in the study period it has not been taken as the unit of analysis but as a relevant pointer. All analyses relating to the PM SHRI scheme are on the number of schools selected, allocation made, releases, and spend, not on its design per se.

The Comptroller and Auditor General of India (2015) report illustrates an additional, broadly governance aspect,. A performance audit of the Mid-Day Meal Scheme reveals that improper use certificates, non-reporting of the unspent funds and diversions of funds in certain cases, and the general lack of robust monitoring mechanism resulted in improper utilization of the resources in question. The CAG audit report, while not representative of all states, or every year, clearly shows that the systems are inadequate to ensure accountability and the public spending is disconnected from service delivery. The literature on targeted groups, for example Kasturba Gandhi Balika Vidyalaya (KGBV) for disadvantaged girls, shows particular vulnerability where allocation of funds is not supported by adequate facilities, staffing, hostel maintenance, and timely utilization of funds.

State-Level Fiscal Disparities: Kerala and Jharkhand

Comparing the two states of Kerala and Jharkhand is a comparison of factual fiscal and outcome data. PRS Legislative Research (2025a, 2025b) shows that in the financial year 2025-26, Kerala reached Rs 26,398 crore to the broad category of education sports arts and culture and this was 13. 4% of total state expenditure while the allocation by Jharkhand to this category reached Rs 18,076 crore, representing 13. 6%.

Although the percentage spent on education remains the same for both states, the state financial status is far apart. For instance,Kerala suffered revenue deficit and higher committed expenditure during FY 2025-26 resulting in less fiscal autonomy. Again, Jharkhand posted a revenue surplus and a lower fiscal deficit as a percentage of GSDP. These macro-fiscal conditions determine to what extent each state can follow the central scheme requirements, fulfill their own matching funding obligations, and sustain expenditure throughout the year.

Departure from these aspects is again reflected by outcome indicators. It is found from PLFS 2023-24 that Kerala has an ultra high literacy rate at 95.3%, while Jharkhand is at 76.7%, as stated in the Ministry of Statics and Programme Implementation, published in 2025. As reported by the Ministry of Education in 2026, the performance grade in PGI 2.0 of 2024-25 has Jharkhand much below Kerala. Each of these indices brings minimal insights for the baseline comparison, yet no outcomes are explained by these indicators. Kerala’s better performance could be a result of its sustained investment in administrative capacity, teacher systems and community engagement over a long period of time. But, this paper only discusses correlation and not causation. None of the indicators reflect equivalent outcomes in Jharkhand despite a more favorable revenue position without the paper establishing a direct causal link between fiscal position and implementation outcomes. Another point that needs to be emphasized is that the PRS category of education sports arts and culture is much wider than school education alone, and these figures should by no means be interpreted as school-specific spending data.

The recurrence of similar governance failures from the Pre-NEP to Post-NEP suggests that NEP 2020’s financing challenge is less a matter of insufficient allocation and more of an execution capacity gap that predates the policy design and there is no evidence that the latest policy design has closed this gap. The present study aims to examine this particular gap more directly.

Synthesis and Research Gap

In the literature, there seem to be three conclusions. First, the financing of school education cannot be discussed without addressing the entire chain from the allocation decision to student outcomes, budget estimates, re-estimated, released to funds in-year, and the in-year actuals; all are separate categories and not comparable with each other. Second, the NEP 2020 has set a high financial and institutional benchmark, and the available post-NEP data shows that improved funding levels haven’t as yet coincided with increased utilisation or higher outcomes. 

Third, comparisons between States, particularly on school-education- related outcomes must be both indicator- and context-specific, because broad strokes can hide disparities in the fiscal space available to each state, the ways in which funds flow, administrative capabilities and the states’ initial conditions. 

While the literature examined these aspects in isolation, a source-verified comparative analysis of allocation, release, expenditure, institutional capability and outcomes across Kerala and Jharkhand both before and after the NEP period has not been addressed. 

We provide such an analysis using only the official confirmed data, annotated according to fiscal heads, and read through the prisms of public expenditure management and fiscal federalism.

Research Methodology

Research Design

This study adopts a comparative descriptive research design based entirely on secondary sources. It does not involve fieldwork, interviews, or surveys. The design is appropriate because it allows systematic comparison of budget allocation, fund release, and expenditure trends over time and across states, while identifying gaps between sanctioned funds and actual spending. Both quantitative data in the form of budget figures, utilisation rates, and scheme-level expenditure, and qualitative interpretation, in the form of audit findings, parliamentary committee observations, and policy analysis are used. The study mainly relies on official government documents, audit reports, and parliamentary reports, supplemented by reputable policy research and media sources where clearly identified.

Period of Study

The study covers FY 2018-19 to FY 2025-26, with reference to FY 2026-27 budget estimates where available. This period is divided into three phases. FY 2018-19 and FY 2019-20 constitute the pre-NEP period, providing the baseline for budget allocation and expenditure patterns before the policy was announced. FY 2020-21 is treated as a transitional year, as NEP 2020 was released in July 2020 and implementation had not yet begun in full. FY 2021-22 onwards constitutes the post-NEP implementation phase. This periodisation allows the study to make a meaningful before-and-after comparison while accounting for the disruption caused by COVID-19 in FY 2020-21, which affected expenditure patterns independently of the policy change.

Data Sources

The study draws exclusively from the following official and peer-reviewed sources:

Union Budget documents and Ministry of Education expenditure reports (Ministry of Education, Government of India)

Parliamentary Standing Committee reports, particularly the 376th Report on Demands for Grants 2026-27 of the Department of School Education and Literacy (Parliament of India, 2026)

PRS Legislative Research budget analyses- National education demand for grants (2026) and state budget analyses for Kerala (2025b) and Jharkhand (2025a)

CAG performance audit reports – Mid-Day Meal Scheme (2015), primary education in Karnataka (2024), school education in Odisha (2025), and Government of Goa (2022)

Accountability Initiative budget briefs on PM POSHAN (Centre for Policy Research, 2023)

Press Information Bureau releases on Ministry of Education budgets (2025, 2026)

PLFS 2023-24 literacy data (Ministry of Statistics and Programme Implementation, 2025)

PGI 2.0 for States and UTs 2024-25 (Ministry of Education, 2026)

Academic studies including Kumar and Singh (2025), Samtani and Bhagavatula (2022), and Kundu et al. (2016)

Analytical Framework

The analysis is conducted across five levels. First, budget estimates and revised estimates are identified for each scheme and financial year. Second, fund release data, where available data is separated into central and state shares. Third, actual expenditure or in-year expenditure is recorded, clearly labelled to distinguish mid-year figures from final annual actuals. Fourth, scheme-level implementation is examined through Samagra Shiksha, PM POSHAN, and PM SHRI. Fifth, outcomes are compared only where indicators are officially verified, using literacy rates and PGI 2.0 scores. These five levels correspond to the conceptual chain of allocation, release, expenditure, implementation, and outcomes that underpins the theoretical framework of this study.

Comparative Approach

The Kerala-Jharkhand comparison uses an indicator-based approach rather than a ranking approach. Neither state is assumed to be superior overall. The PRS category of education, sports, arts and culture is used for state-level allocation data, with a clear acknowledgement that this is broader than school education alone. PGI 2.0 and literacy rates are used only as limited baseline indicators, not as comprehensive measures of school quality or learning outcomes. Where state-specific data on teacher availability, infrastructure, dropout rates, or learning outcomes is unavailable or unverified, the study acknowledges this as an evidentiary gap rather than estimating or inferring figures.

Limitations

The study is limited by the availability of publicly accessible and comparable data. State-level expenditure figures are not always disaggregated by scheme or school level, making precise comparisons difficult across years. In-year expenditure figures, such as those available as of 13 February 2026 cannot be directly compared to final annual actuals from previous years, and are clearly labelled as such throughout the analysis. The study does not include primary surveys or field-level interviews, which means ground-level implementation realities and beneficiary perceptions are not captured. Despite these limitations, the reliance on government, audit, and reputable policy sources provides a strong and largely verifiable basis for analysis.

Analysis and Findings

Finding 1: Budget Allocation Has Grown But Remains Below NEP Targets

NEP 2020, at the time of its release had acknowledged India’s education expenditure at a figure of approximately 4.43% of GDP which represented only 10% of the total government expenditure (Ministry of Education, 2020). Therefore, with its release, the vision to meet the aspirations of the education sector of India’s schools was quite evident in the sector allocations. There was consistent nominal growth in the Indian school’s education budget as the Ministry of Education received Rs 1,28,650 crore in FY 2025-26 and Rs 1,39,289.48 crore in FY 2026-27, with the Department of School Education and Literacy alone being allocated Rs 78,572 crore and Rs 83,562.26 crore respectively (Press Information Bureau, 2025, 2026). In spite of this, India could not position itself anywhere near to the most developed and developing countries in the field of expenditure at education– as the combined Centre and State spending on education remained at an estimated 4.1% of GDP in 2022-23, far beyond the 6% benchmark recommended by NEP 2020 (PRS Legislative Research, 2026). Even after five years since the implementation of NEP 2020, the gap between aspiration and actual utilisation has remained largely disconnected. 

Finding 2: Scheme-Level Data Reveals a Persistent Execution Gap

The Samagra Shiksha data has shown an average annual utilisation of approximately 86% (PRS Legislative Research, 2026) which interestingly, is contrary to the data of Parliamentary Standing Committee which shows only Rs 22,633.88 crore expenditure against a budget estimate of Rs 41,250 crore for FY 2025-26 as of 13 February 2026. This represents just 54.9% utilisation at that point in the year (Parliament of India, 2026) signalling a tendency of release and utilisation of funds at the final weeks of the fiscal year. This negatively affects the quality aimed at implementation and monitoring, which was meant to be meaningful. 

The PM POSHAN scheme presented a similar picture, where its budget estimate of Rs 12,500 crore for FY 2025-26 was revised downward to Rs 10,600 crore. The expenditure was recorded at Rs 6,639.22 crore, as of 13 February 2026 (Parliament of India, 2026). 

Moreover, the Accountability Initiative (2023) reported that only 52% of approved Government of India funds under PM POSHAN were released as of 31 December 2022 in FY 2022-23. The delayed central release was a major factor that contributed in driving the expenditure gap wider, apart from the state-level absorption failure that is commonly highlighted. 

Finding 3: Governance Failures Compound the Gap

Governance failures became one of the focal reasons that stretched the gap under study, as confirmed by the CAG audit findings. The performance reports for Karnataka showed unspent SSA closing balances ranging from Rs 94.08 crore to Rs 1,026.83 between the years 2017-18 and 2021-22 (CAG Karnataka, 2024). Odisha had been pointed out for a corresponding issue, as utilization stood between 44% and 50% throughout 2018-23 (CAG Odisha, 2025). Goa, on the other hand, did not prepare mandatory Perspective Plans and District Annual Work Plans and Budgets for five consecutive years (CAG Goa, 2022); this highlighted a major planning failure of administration that disrupted both fund flow and scheme execution. 

The Mid-Day Meal Scheme suffered through similar governance failures, which cost the education sector terribly. The critical issues included incorrect utilization certificates, incorrectly reported and unreported unspent balances, and diversion and parking of funds in some cases. CAG performance audit (CAG, 2015) revealed cases involving systemic monitoring failures across many states. However, the findings do not represent every school under the years studied, but have revealed the patterns of weak financial controls which reduces the reliability of the reported expenditure that again contradicts the actual spending in contrast to the actual delivery of service at the ground level. 

Finding 4: Kerala and Jharkhand Show Similar Allocations but Different Realities

For the FY 2025-26, Kerala and Jharkhand have been observed to have proportional commitment, where Kerala allocated Rs 26,398 crore to education, sports, arts and culture which constituted 13.4% of total expenditure, Jharkhand allocated Rs 18,076 crore, which represented 13.6% (PRS Legislative Research, 2025a, 2025b) of total expenditure. However, the outcome indicators diverged; for fiscal context, Kerala carried a revenue deficit limiting flexibility, while Jharkhand showed a revenue surplus. Kerala’s literacy rate stands at a strong 95.3% against Jharkhand’s 76.7% (PLFS 2023-24), and Kerala also leads Jharkhand in PGI 2.0 rankings for 2024-25 (Ministry of Education, 2026). These gaps may reflect longer-term differences in administrative capacity, teacher systems, and community engagement, but this paper does not establish causality between these factors and the observed outcome differences.

Discussion

The findings from this study clearly shows that India’s budget-to-expenditure gap in school education financing is not simply a problem of insufficient fund allocation but a systemic problem deep-rooted in delayed funds, lack of planning, inter-governmental co-operation and lack of accountability. This issue is not new to India’s education sector and the introduction of the National Education Policy of 2020 has not resolved the underlying structural issues like weak governance and institutional incapacity .

RQ1. The widening of budget-to-expenditure gap post-NEP :- 

The period before the introduction of NEP suffered with chronic underfunding relative to its target.The post-NEP period introduced higher allocations reiterating its previous goal of 6% of GDP. Although the Education Ministry’s budget grew nominally by 29.5% between FY 2020-21 and FY 2025 the execution gap remained as before, not for the cause of unavailability but the weak systems that could not move funds from allocation to actual spending, in the stages of release, planning, certification and monitoring The samagra shiksha’s average annual utilisation of 86% appears adequate but the data showing 54.9% utilisation as of February 2026 reveals a structurally back-loaded expenditure pattern which not only undermines the quality and implementation of the schemes but may also affect the learning outcomes of the students.The fund release pattern under PM POSHAN scheme reinforces the fact that delay in release of funds from the centre to states creates a cascading effect both at the state and district level ultimately affecting the beneficiaries of these schemes. 

This delay is compounded at the state level by weak district-level planning, as seen in Goa’s failure to prepare mandatory Perspective Plans and AWP&Bs for five consecutive years (CAG, 2022) which left the states unready to absorb released funds. Further, governance failures in monitoring and certification widen the gap as improper utilisation certificates and unreported balances were flagged in the Mid-Day Meal audit (CAG, 2015), and unspent SSA balances in Karnataka (CAG, 2024) and Odisha (CAG, 2025) surfaced only through audit rather than real-time tracking. Together, these show the post-NEP gap stems not from delayed release alone, but from late funds, unprepared districts, and weak monitoring reinforcing each other. 

RQ2. Analysis of Kerala and Jharkhand’s performance:-

Both states allocate approximately 13-14% of their total expenditure for education yet their outcome differs significantly in all parameters be it the literacy rate, Performance Grading Index etc. Kerala’s outstanding performance compared to Jharkhand may be due to its administrative capacity, teaching system and community engagement, though this paper does not establish causality between these factors and better outcomes. Evidence suggests that structural and administrative constraints may have limited the effectiveness of fiscal spending in improving educational outcomes in Jharkhand..This establishes that increased fiscal capacity of the state alone cannot determine its performance.

The CAG’s audit report on several states strengthens the holding that increased spending does not necessarily improve educational outcomes. The issues like unspent balances, misallocation of funds, missing planning documents, incorrect utilisation certificates and failure to monitor the expenditures clearly shows that these are not anomalies but recurring patterns that appear consistently in all audit reports across Indian states. This suggests that the gap between the allocated budget and expenditure may be due to the institutional incapacity of educational financing, not merely an implementation failure on the state’s part.

Conclusion and Policy Recommendations

This study examines the gap between the budget allocated and actual expenditure in India’s school education sector across the pre-NEP and post-NEP. It compares two states Kerala and Jharkhand on the basis of fiscal capacity and implementation performance.The evidence consistently shows that higher budgetary allocation has not yielded higher results in terms of fund utilisation, execution of schemes like PM POSHAN or educational outcomes. The study has concluded that the gap is not incidental but organizational caused by weak governance and institutional incapacity.

Based on the findings, this study proposes the following four policy recommendations:-

1) Central transfers under Samagra Shiksha and PM POSHAN should be fixed and released in the first quarter of the fiscal year with mandatory release schedules enforced by the Ministry of Finance and the Department of School Education and Literacy (DoSEL) through PFMS-tracked quarterly targets, reviewed by the Parliamentary Standing Committee, so as to avoid compressing implementation into the final weeks of the financial year and to move the spending away from the back-loaded 54.9% pattern seen in FY 2025-26. 

2) District-level planning must be made mandatory, with the DoSEL and State Education Departments should track compliance through a centralised and publicly available DPB submission tracker, and the states which fail to prepare Perspective Plans and AWP&Bs must be penalised. Planning compliance should be a prerequisite for states to receive central funds, ensuring no state repeats Goa’s five-year non-compliance. 

3) Real-time audits of expenditure and utilisation certificates must be digitised, with the State Treasury/Finance Departments filing and DoSEL’s PFMS cell should verify UCs against quarterly compliance rates cross-checked with CAG sampling. The CAG’s findings on unspent balances again point to a monitoring gap that this integration would close, enabling faster release of subsequent tranches and reducing the kind of unspent or misreported balances found in Karnataka and Odisha. 

4) States like Jharkhand which face structural challenges must be incentivised and supported by the Ministry of Education and State Education Departments to invest in capacity building for procurement and fund monitoring and tracked through an annual state-wise capacity and implementation scorecard, so that low-capacity states close the execution gap with better-performing states like Kerala over time rather than just the allocation parity which persists alongside outcome disparity. 

The fundamental problem of India’s school education financing is not about spending more but ensuring that every rupee allocated is released on time and spent judiciously. A transparent system must be established to trace every expenditure to improve learning outcomes. Unless and until the institutions involved are strengthened, the gap in India’s education financing will continue to exist no matter the policy adopted to narrow it.

References

Accountability Initiative, Centre for Policy Research. (2023). Pradhan Mantri Poshan Shakti Nirman (PM POSHAN) scheme, GoI, 2023–24 (Budget Briefs, Vol. 15, Issue 4). https://accountabilityindia.in/wp-content/uploads/2023/02/PM-POSHAN-Budget-Briefs-2023.pdhttps://accountabilityindia.in/wp-content/uploads/2023/02/PM-POSHAN-Budget-Briefs-2023.pdf

Comptroller and Auditor General of India. (2015). Report No. 36 of 2015: Performance audit of Mid-Day Meal Scheme, Union Government, Ministry of Human Resource Development. https://cag.gov.in/uploads/download_audit_report/2015/Union_Performance_Civil_Mid_Day_Meal_Report_36_2015_2.phttps://cag.gov.in/uploads/download_audit_report/2015/Union_Performance_Civil_Mid_Day_Meal_Report_36_2015_2.pd

Department of School Education and Literacy. (n.d.). Samagra Shikshahttps://samagra.education.gov.in/about.html

Kumar, P., & Singh, A. (2025). Five years of NEP 2020: A review of structural transformations in Indian education. Asian Journal of Education and Social Studies, 51(12), 154–164.https://doi.org/10.9734/ajess/2025/v51i122683

Kundu, P., Rout, S., Singh, G., & Rehman, K. M. U. (2016). Public financing of school education in India: A fact sheet. Centre for Budget and Governance Accountability & Child Rights https://www.cbgaindia.org/wp-content/uploads/2016/12/Fact-Sheet-CBGA-and-CRY.pdf

Ministry of Education. (2020). National Education Policy 2020. https://www.education.gov.in/sites/upload_files/mhrd/files/NEP_Final_English_0.pdf

Ministry of Education. (2021). Guidelines of Pradhan Mantri Poshan Shakti Nirman (PM POSHAN) 

Ministry of Education. (2026). Performance Grading Index 2.0 for States/UTs, 2024–25. Department of School Education and Literacy.

Ministry of Statistics and Programme Implementation. (2025). Lok Sabha unstarred question no. 4441: Literacy position in the country. https://sansad.in/getFile/loksabhaquestions/annex/185/AU4441_bSNrYF.pdf?source=pqals

Parliament of India. (2026). Three hundred seventy-sixth report on demands for grants 2026–27 of the Department of School Education and Literacy. Department-related Parliamentary Standing Committee on Education, Women, Children, Youth.

Press Information Bureau. (2025, February 1). Union Education Minister lauds historic Budget 2025–26. https://www.pib.gov.in/PressReleaseIframePage.aspx?PRID=2098805

Press Information Bureau. (2026, February 1). Union Education Minister lauds historic Budget https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221734

PRS Legislative Research. (2025a). Jharkhand budget analysis 2025-26

PRS Legislative Research. (2025b). Kerala budget analysis 2025–26

PRS Legislative Research. (2026). Demand for grants 2026–27 analysis: Education.https://prsindia.org/budgets/parliament/demand-for-grants-2026-27-analysis-education

Samtani, S., & Bhagavatula, S. (2022). National Education Policy (NEP) 2020: A necessary investment for India’s education imperatives. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.4061748