The government is targeting the skilling of workforce in tier-II and tier-III cities, with a focus on labour-intensive sectors such as textiles, small-scale enterprises, tourism and medical tourism, finance minister Nirmala Sitharaman said in her budget speech on Sunday.
A high-level committee will be set up to examine skill gaps across industries, assess the impact of emerging technologies, including artificial intelligence (AI), on jobs, and upgrade education curricula with an understanding of AI in mind, she said.
The Economic Survey 2025-26 pointed to a gap between skilling efforts and labour-market outcomes. “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,” it said.
Sitharaman proposed an integrated programme for the labour-intensive textile sector, which includes a Textile Expansion and Employment Scheme to modernise traditional clusters with capital support for machinery, technology upgradation, and common testing and certification centres.
Vision of Viksit Bharat
Cognisant of the impact of artificial intelligence on jobs, the proposed High-Powered Education-to-Employment and Enterprise Standing Committee will recommend measures focusing on the services sector as a core driver of India’s vision of Viksit Bharat. Sitharaman said the committee “will prioritise areas to optimise the potential for growth, employment and exports. They will also assess the impact of emerging technologies, including AI, on jobs and skill requirements and propose measures accordingly.”
These measures come against the backdrop of AI impacting jobs across sectors, with corporates globally retrenching employees as large sections of roles get automated. While Indian companies are reskilling its workforce in AI, the need for ready-to-use talent remains critical.
Recruitment firms note that while skilling is crucial, much will depend on implementation. According to the Economic Survey, India’s workforce exceeds 560 million.
“Measures supporting manufacturing, services and digital infrastructure can help generate formal employment. The emphasis on education-to-employment initiatives is a positive step towards aligning skills with industry demand,” said Sunil Chemmankotil, country manager, Adecco India. “Effective execution will determine how well these measures translate into real, sustainable employment across the country,” he added.
The committee will also propose specific measures to embed AI in the education curriculum from the school-level onwards, and to upgrade State Councils of Educational Research and Training (SCERTs) to strengthen teacher training.
“The link between school education, apprenticeships, internships and work-integrated learning is key to our success, and that should be the committee’s core agenda. However, intent alone is not enough. The real outcome will depend on execution—how quickly rules are notified, how consistently they are implemented across states, and how well industry, education institutions and employers collaborate,” said Neeti Sharma, chief executive officer (CEO), TeamLease Digital.
The government on Sunday proposed zero tax on global cloud services—such as those offered by Microsoft, Google and Amazon—provided through an Indian entity and from an Indian data centre.
“Attracting global business and investment, recognising the need to enable critical infrastructure and boost investment in data centres, I propose to provide a tax holiday until 2047 to any foreign company that provides cloud services to customers globally by using data centre services from India,” Sitharaman said.
The move is expected to have a direct bearing on employment. “The tax holiday will encourage more data centres and global capability centres to establish their base in India, which in turn will lead to increased employment in both metros and tier-II cities,” said Lohit Bhatia, CEO of recruitment firm Quess Corp.
In its bid to attract global talent, the budget for 2026-27 proposes to provide tax exemption to global income (other than Indian-sourced income) to an expert who visits India and stays for five years. “To encourage vast pool of global talent to come and work in India for a longer period of time, there is a need to provide tax certainty to them that only their Indian sourced income will be taxed in India despite their long period of stay,” Sitharaman said.
India plans to focus on research and training centres to develop technology and skilled workforce in the semiconductor industry. In December 2021, the government announced its first semiconductor incentive scheme worth ₹76,000 crore, triggering the announcement of India’s first private-sector chip fabrication plant along with several assembly facilities. While the semiconductor industry is highly automated, these projects have committed to generating local employment.
A proposal to form four rare-earth corridors to promote mining, processing, research and manufacturing is expected to boost employment in the mining and processing sectors. The government’s push for rare-earth minerals comes at a time when it’s seeking to localise the rare-earth magnet ecosystem in India. Extraction and processing of rare-earth minerals are critical initial steps in manufacturing rare-earth magnets used in sectors such as defence, automobiles and electronics.
Additionally, the government will support institutions such as the Institute of Chartered Accountants of India, the Institute of Company Secretaries of India and the Institute of Cost Accountants of India in developing short-term, modular courses and practical tools. These efforts will create a cadre known as “Corporate Mitras”, who are expected to help medium and small-scale enterprises meet compliance requirements at affordable costs.
Tourism and its link to employment was another key focus in this budget. “The tourism sector has the potential to play a significant role in employment generation, foreign exchange earnings and expansion of the local economy,” Sitharaman said. A National Institute of Hospitality is proposed to bridge the gap between industry and academia. The government also announced a pilot scheme to upskill 10,000 tourist guides across 20 iconic tourist sites through a 12-week hybrid training programme in collaboration with an Indian Institute of Management.
According to a 2025 study by the World Travel & Tourism Council (WTTC), travel and tourism are expected to contribute nearly ₹42 trillion and generate about 64 million jobs in India by 2035.
India will also create a National Destination Digital Knowledge Grid to document places of spiritual and cultural significance, aimed at boosting employment for local researchers, historians, content creators and technology partners, the finance minister noted.
A proposal to establish five regional medical hubs, in partnership with the private sector, is expected to create diverse job opportunities for healthcare professionals.
Upskilling in the sports industry is also under focus under the Khelo India Mission, which is expected to enhance skills among coaches, players and support staff.
