India's Budget 2026 Focuses on Skills Development and Employment

In a bid to enhance employment opportunities, India's Union Budget 2026 has emphasised skills training and workforce development, particularly in tier-II and tier-III cities. Finance Minister Nirmala Sitharaman articulated these strategies during her budget presentation, marking a shift towards prioritising job conditions over mere job creation.

Sitharaman outlined a framework focusing on labour-intensive sectors such as textiles, small-scale enterprises, and tourism. A significant part of this plan includes the establishment of a high-level committee to address skill gaps across various industries. This committee aims to assess the impact of emerging technologies, especially artificial intelligence (AI), on job requirements.

According to the Economic Survey of 2025-26, the current skilling efforts in India have not translated effectively into sustainable job outcomes. The survey noted, "The central challenge in India’s skilling landscape is not the absence of training effort but the weak translation of training into durable labour-market value." To address this, the Finance Minister announced an integrated programme for the textile sector, which includes a Textile Expansion and Employment Scheme designed to modernise traditional textile clusters. This involves providing capital support for machinery and technology updates as well as establishing common testing and certification centres.

Recognising the growing influence of AI on employment, the proposed High-Powered Education-to-Employment and Enterprise Standing Committee will focus on the services sector's vital role in implementing India's vision of a developed nation, termed Viksit Bharat. The committee is expected to recommend measures that enhance growth, employment, and export potential. Sitharaman remarked, "This committee will prioritise areas to optimise the potential for growth, employment and exports."

The government's recognition of AI's role comes at a time when many companies worldwide are automating jobs, leading to workforce reductions. Despite these challenges, Indian firms are seeking to reskill employees for a more AI-centric workforce. Recruitment experts suggest that while skilling initiatives are crucial, their success will largely depend on effective execution.

As India's workforce is estimated to exceed 560 million, Sitharaman's proposal addresses the need for significant investments across manufacturing, services, and digital infrastructure to foster formal employment. Sunil Chemmankotil, the country manager for Adecco India, expressed optimism, stating that the focus on education-to-employment initiatives could align skills with industry requirements. However, he cautioned that successful translation of these measures into sustainable jobs hinges on meticulous implementation.

The government also proposed integrating AI into educational curriculum at various levels to ensure that the future workforce is adequately prepared for technological advancements. The recommendations will look at enhancing teacher training through State Councils of Educational Research and Training (SCERTs) and focus on the connection between school education, apprenticeships, and practical working experiences.

Additionally, the 2026-27 budget introduces a zero tax on global cloud services if provided through Indian entities, purportedly to bolster data centre investments. This move is expected to have a direct positive effect on employment, particularly in both metropolitan and tier-II cities, as explained by Lohit Bhatia, CEO of Quess Corp.

Sitharaman's plans also encompass the semiconductor industry, with an aim to develop training centres for technology and skill enhancement. The government previously launched an incentive scheme to stimulate India's semiconductor sector, which, while highly automated, is projected to create local jobs. The proposed establishment of four rare-earth mineral corridors further aims to enhance employment opportunities in the mining and processing fields, a move critical for manufacturing industries like defence and electronics.

Tourism remains a focal area as well, with the Finance Minister emphasising its potential in generating employment and foreign exchange. A National Institute of Hospitality is proposed to bridge industry needs with academia. Moreover, a pilot scheme to train 10,000 tourist guides at 20 major tourist destinations is set to commence, designed in collaboration with Indian Institutes of Management to enhance job readiness.

According to a 2025 World Travel & Tourism Council study, the sector is projected to contribute nearly ₹42 trillion to the economy and create approximately 64 million jobs in India by 2035. To document India's cultural and spiritual landmarks, the government plans to launch a National Destination Digital Knowledge Grid, aimed at providing employment for local researchers and content creators.

In summary, India’s Union Budget 2026 articulates a comprehensive approach towards enhancing employment through skills development, especially in emerging technologies like AI. The government aims to implement initiatives that not only meet current job market demands but also secure sustainable employment for the future.