PM Internship Scheme Faces Drastic Budget Reduction in FY27 Union Budget
Finance Minister Nirmala Sitharaman presented the Union Budget for the fiscal year 2026-27 on Sunday, February 1, 2026, in New Delhi, revealing a significant funding cut for one of the government's key youth employment initiatives.
Sharp Decline in Allocation Following Poor Implementation
The Prime Minister's Internship Scheme (PMIS), a flagship program launched by the Modi administration to enhance youth skilling and employability, has seen its budget allocation reduced to ₹4,799.96 crore for FY27. This represents less than half of the over ₹10,000 crore that was earmarked for the scheme in the previous fiscal year (FY26).
The substantial reduction comes in response to unspent funds and a lukewarm response from potential candidates. Revised estimates for FY26 show that the corporate affairs ministry spent only ₹541.4 crore on the PMIS, which amounts to approximately 5% of the scheme's original budget for that year.
Disproportionate Budget Allocation Despite Low Utilization
Interestingly, despite the scheme's poor performance in FY26, where it accounted for nearly 94% of the corporate affairs ministry's total ₹11,561.19 crore allocation, the ministry has continued to prioritize it in the new budget. Analysis indicates that 86.3% of the ministry's FY27 budget has been set aside for the PMIS, highlighting its continued importance in government planning despite implementation challenges.
Scheme Struggles with Participation and High Dropout Rates
Announced in the FY25 budget, the PMIS was designed to provide internships to 10 million candidates in India's top 500 companies over a five-year period. However, the initiative has faced substantial hurdles in attracting and retaining participants.
Government data shared in Parliament in December 2025 revealed a dropout rate exceeding 40% among participants. The scheme underwent two pilot rounds:
- Round 1 (October 2024): Recorded a dropout rate of 52.1%
- Round 2 (January 2025): Saw improved but still concerning dropout rate of approximately 28%
Overall participation numbers have been disappointing. Of the 52,779 candidates who accepted internship offers across both pilot rounds, only 16,060 (about 30%) actually joined the program. Among those who joined, 6,618 candidates (41.2%) dropped out before completing their internships.
Factors Contributing to Poor Response
The government has identified several key factors contributing to the scheme's lackluster performance:
- Location constraints: Most candidates prefer internships within 5-10 kilometers of their homes, limiting placement opportunities
- Duration concerns: The program's 12-month tenure is longer than most other skilling initiatives, making it less attractive to participants
- Inadequate stipend: Experts have flagged the ₹5,000 monthly stipend as insufficient, particularly for interns working in tier-1 cities where living costs are substantially higher
For candidates relocating from smaller towns, the costs associated with moving often outweigh the potential earnings from the internship program.
Broader Context of Youth Unemployment in India
The challenges facing the PMIS occur against a backdrop of significant youth employment concerns in India. According to data from the Periodic Labour Force Survey (PLFS), youth unemployment in India exceeds three times the all-India average annual figure of 3.2%.
This disparity highlights the urgent need for effective skilling and employment programs, while also explaining the government's continued investment in initiatives like the PMIS despite implementation challenges.
The substantial budget reduction for FY27 represents a recalibration of government spending based on actual program performance, signaling a more pragmatic approach to flagship initiatives that may require structural adjustments to achieve their intended outcomes.
