Finance Minister Nirmala Sitharaman announced Rs 1,39,289 crore for the Ministry of Education in her ninth straight Union Budget on February 1, 2026. This was the largest education outlay in India’s budget history, 8.27% higher than the previous year. The Ministry of Skill Development and Entrepreneurship received Rs 9,886 crore, a 62% increase. The Budget also announced a high-powered standing committee on Education to Employment and Enterprise, AI in school curricula, five university townships near industrial and logistics corridors, and a renewed push to prepare young Indians for work under the Viksit Bharat banner.
The numbers are large. The ambition is clear. The policy, however, is aimed at the easier problem.
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Education budget and caste wage gap
Every rupee of that Rs 1.39 lakh crore education allocation, along with Skill India, NEP 2020’s equity provisions and post-matric scholarships for SC and ST students, rests on a familiar assumption: the labour market will reward marginalised workers fairly once they acquire more and better skills. The human-capital view associated with Theodore Schultz and Gary Becker gives this assumption its respectable pedigree. Education raises productivity, and competitive markets reward productivity.
That is an incomplete account of how India’s labour market treats Scheduled Caste and Scheduled Tribe workers.
A seven-round analysis of Periodic Labour Force Survey data, covering more than 7.69 lakh informal workers in rural and urban India between 2017–18 and 2023–24, shows that education does help SC and ST workers move into better forms of informal employment. That part of the theory holds. But the same data also show that SC workers get much lower wage returns for each extra year of schooling than equally educated General category workers in the same labour market.
After 12 years of schooling, a General category worker earns a 61.2% wage premium over an equivalent worker with no education. An SC worker with the same schooling earns a premium of only 31.5%. The market is not pricing the same credential in the same way. No budget speech addresses that fact.
Skill development and weak placement
The skilling push has its own problem. CAG’s 2025 audit of the Pradhan Mantri Kaushal Vikas Yojana found that only 41% of candidates certified under short-term training and special project components were placed. As of March 2024, about one-fifth of funds released to states between 2016 and 2024 remained unspent. The Ministry of Skill Development and Entrepreneurship spent only 61% of its allocation in 2024–25 and 44% of the revised estimate in 2025–26. By December 2025, actual spending was only 15% of the year’s allocation. The Economic Survey 2025–26 says only 4.9% of Indians aged 15–29 have received formal vocational or technical training, while 21.2% depend on informal sources.
India is training fewer workers than its rhetoric suggests, spending less than it allocates, and placing too few of those it certifies. It is hard to maintain, in this setting, that SC and ST workers merely need more skills to close labour-market gaps. The demand for SC and ST labour at wages paid to equally qualified upper-caste workers is the sharper question.
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Code on Wages and caste discrimination
India had a chance to extend equal-pay protections to caste-based wage discrimination when the Equal Remuneration Act was replaced by the Code on Wages in 2019. It did not take it. Section 3 of the Code prohibits discrimination in wages on the ground of gender. It does not create a comparable equal-pay remedy for caste.
The omission has measurable consequences. The PLFS analysis shows that a graduate SC worker in a higher-return informal job, whether regular salaried work, a skilled occupation or a moderately sized enterprise, earns Rs 14,041 less per month than an equally qualified General category worker in the same employment segment. That is Rs 1.68 lakh a year for equivalent labour.
Indian law has no direct system to identify, quantify or remedy this. Companies are not required to disclose caste-wise wage data. Labour inspectors are not asked to examine caste wage gaps. Policy evaluations rarely measure them. Since private firms do not report the caste and religious composition of their workforce, India cannot reliably map who gets hired, where they are placed and what they are paid.
The discrimination is not hidden. It is not measured.
Meritocracy and private sector hiring
Indian industry’s public position on caste in the workplace is simple: it does not exist there. Under-representation of SC and ST workers in better-paid jobs is usually explained through deficits in education, language, networks or polish. Jobs, the argument goes, go to the most qualified.
That claim does not survive field evidence. In the first major correspondence study of private sector hiring in India, Sukhadeo Thorat and Paul Attewell sent identical CVs with upper-caste and Dalit names to the same job listings. Dalit applicants received fewer callbacks despite identical qualifications. Discrimination did not arise after education failed. It operated before education could be rewarded.
Madheswaran and Attewell extended the evidence to wages, showing that caste explains a significant part of earnings disparities between SC/ST and upper-caste workers. Occupational discrimination, exclusion from better jobs, mattered even more than wage discrimination within the same job.
The ladder exists. Access to its lower rungs is unequal. Yet the policy response is to give marginalised workers more training to climb a ladder whose entry points are still controlled by social networks, informal hiring and unreported wage-setting practices.
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SC/ST mobility in informal work
India’s policy debate often confuses reallocation with mobility. Education should not be dismissed when it helps SC and ST workers move from casual labour to informal salaried work. But mobility means more than a shift in job category. It must also mean parity in wages, employment security and returns on additional education.
PLFS data show that India’s education system is producing reallocation more reliably than mobility. After controlling for observable individual characteristics, SC workers still earn 12.2% less and ST workers 10.3% less than equally educated and experienced General category workers within the higher-return informal employment segment. These are workers who have already improved their labour-market position. The caste gap survives the upgrade.
Barbara Harriss-White argued in her study of India’s informal economy that social institutions, not impersonal market forces alone, organise the sector and decide who gets paid for what. PLFS data from 2017 to 2024 give that argument national scale.
The trend is worse for ST workers. The share of ST workers in lower-return informal employment, the most precarious form of work, rose from 67.2% in 2017–18 to 87.7% in 2023–24. The pandemic deepened the deterioration. Five years after COVID-19, SC and ST informal workers have not regained their pre-pandemic employment quality.
Civil society analyses of Budget 2026–27 show that SC and ST allocations have risen in nominal terms, but many funds remain non-targeted, underutilised or hard for intended communities to access. A recovery narrative built on GDP growth, lower headline unemployment and record education allocations is missing a deterioration in work quality for India’s most marginalised workers.
Urban SC women and the education penalty
One finding deserves more attention than it has received. The expected relationship between education and wages does not hold for urban SC women. The wage gap between urban SC women and equally educated General category women does not narrow as schooling rises. It widens. The more credentials an urban SC woman acquires, the larger her wage penalty becomes relative to her upper-caste counterpart.
The credentials are being acquired. The market discounts them more severely as they accumulate.
Mehrotra and Parida identified the intersection of caste and gender as a neglected source of inequality in urban informal employment. PLFS data suggest that skill development programmes for urban SC women may be producing credentials that the urban informal labour market systematically undervalues. More training alone will not close this gap. Wage-setting practices and hiring structures have to be examined directly.
Caste wage reporting and private employment
Recent analyses of Budget 2026–27 have noted that the Budget’s employment and skilling language is stronger than the fiscal commitment behind it. The argument here is not against education. It is against using education as a substitute for every other intervention.
Since Independence, India has built tools to address caste disadvantage in public employment: reservations, post-matric scholarships and special recruitment drives. These exist because the Constitution’s framers understood that accumulated disadvantage could not be corrected by education alone. The private and informal sectors, where more than 90% of India’s workforce earns a living, have no comparable toolkit.
India needs to monitor caste wage discrimination in informal and private employment. The Code on Wages, 2019 does not extend equal-pay protection to caste. Budget 2026–27 does not address the gap. Enterprises above a defined size should report caste-disaggregated wage data, as some jurisdictions require gender pay-gap reporting. Education and skill programmes should measure not only enrolment, completion and placement, but also wage returns by caste and gender.
Hnatkovska, Lahiri and Paul found that intergenerational occupational mobility between SC/ST and non-SC/ST workers improved during the liberalisation period, while absolute gaps persisted. Seven rounds of PLFS data show that these gaps are not closing fast enough. In some places, they are widening.
Rs 1.39 lakh crore is a large education allocation. It is being used to answer only part of the question. Dalit and Adivasi workers need better schooling and better skills. They also need a labour market that does not discount the same credential when it is carried by the wrong surname, neighbourhood or social history. The wage slips show the cost of avoiding that question.
Dr Aneesh K A is Assistant Professor of Economics & Fellow at the Centre for Studies in Population and Development (CSPD), CHRIST University, Delhi NCR Campus. Siddharth Jogdand is an intern at CSPD.