Human Capital Formation in India
- 1 Human Capital
- 2 Physical Capital
- 3 Difference between Physical Capital and Human Capital
- 4 Human Capital Formation
- 5 Sources of Human Capital Formation
- 6 Human Resource Development
- 7 Role of Human Capital Formation in Economic Growth
- 8 Problems Facing Human Capital Formation
- 9 Education
- 10 Importance and Objectives of Education
- 11 Problems Relating to Development of Education in India
- 12 Human Capital Formation in India
- 13 The interrelationship between Human Capital Formation and Economic Growth
- 14 Education Sector in India
- 15 NCERT Solutions
- 16 Share this:
Human capital refers to the stock of skill, ability, expertise, education and knowledge in a nation at a point of time.
Physical capital refers to assets which themselves have been manufactured and are used for the production of other goods and services.
Difference between Physical Capital and Human Capital
It is tangible
It is intangible.
It is separable from its owners.
It cannot be separated from its owners.
It is perfectly mobile between the countries.
Its mobility is restricted by nationality and culture.
It depreciates over time due to constant use or due to change in technology.
It though depreciates with aging but can be made up through continuous investment in education and health.
It creates only private benefit.
It creates private benefit as well as social benefit.
Human Capital Formation
The human capital formation is the process of adding to the stock of human capital over a period of time.
Sources of Human Capital Formation
- Expenditure on education.
- Expenditure on health.
- On the job training.
- Study programmes for adults.
- Migration and expenditure on information.
Human Resource Development
It refers to the development of the set of the individual that makes up the workforce of an organization, business sector or economy.
Role of Human Capital Formation in Economic Growth
- Raises production
- Change in an emotional and physical environment of growth.
- Improves the quality of life.
- Raises life expectancy.
- Innovative skills.
- Raises social justice and equality.
Problems Facing Human Capital Formation
- Rising population
- High regional and gender inequality.
- Brain drain
- Insufficient manpower planning.
- Insufficient on the job training in agriculture
- High poverty levels
- Low academic standards.
It implies the process of teaching, training, and learning especially in schools, colleges, to improve knowledge and develop skills.
Importance and Objectives of Education
- Education produces good citizens.
- Education facilitates the use of resources in the country.
- Develops science and technology.
- Expands the mental horizon of the people.
- Promotes cultural standard of the citizens.
- Develops human personality.
Problems Relating to Development of Education in India
- A large number of illiterates.
- Inadequate vocational.
- Gender bias.
- Low rural access level.
- Low government expenditure on education.
Human Capital Formation in India
- The seventh five-year plan stressed the importance of human capital.
- In India, the ministry of education at the Centre and state level, NCERT (National Council of Educational Research and Training), UGC (University Grant Commission), AICTE (All India Council of Technical Education) regulate the education sector.
- In India, the Ministry of Health at the Union and the State level and ICMR (Indian Council of Medical Research) regulate the health sector.
- World Bank states that India will become the knowledge economy. Also if India uses its knowledge as much as Ireland does then the per capita income will rise by $ 3000 by the year 2020.
The interrelationship between Human Capital Formation and Economic Growth
Human capital formation raises the process of Economic Growth and economic growth raises the process of human capital formation.
(i) The rise in human capital raise economic growth
Rise in Human Capital
Modern attitude and outlook, better quality of life, Higher life expectancy
More economic growth
(ii) The rise in economic growth raises the human capital formation
The rise in Economic Growth
Rise in per capita income
More investment in education and health
The rise in human capital
Education Sector in India
- Elementary Education
- Elementary education covers students from class 1 to class 8 (primary and middle) in the age-group of 6 to 14 years. The number of primary and middle schools has considerably increased from 2.23 lakhs (in 1950-51) to 11.92 lakhs (in 2011-12). Near about 97% of children in the age group of 6-14 years have been receiving educating in schools.
- Various policies such as Sarva Shiksha Abhiyan, mid-day meal scheme, district primary education programme, the right to education have been playing a major role in enhancing primary education in India.
- Secondary and Senior Secondary Education
- As per a survey, a number of secondary and senior secondary schools rose to 2.12 lakhs and the number of students getting an education at this level rose up to 482 lakhs.
- At the central level, Navodaya schools and Kendriya Vidyalayas are playing a vital role in promoting education at this level.
- Higher Education
- As per a survey in India near about 665 universities are imparting education at the higher level and a number of colleges imparting general education are 35829.
- A number of students getting the higher education are about 130 lakhs.
- In addition to it, since independence, the number of institutions imparting technical and professional education has increased significantly in India in which polytechnical institutions, engineering colleges, medical colleges, research centers like IIT, agriculture research institute, India statistical institute, IIM etc. are playing prominent roles.
Question 1. What are the two major sources of human capital in a country?
Answer. Investments in education and health are the two major sources of human capital.
Question 2. What are the indicators of educational achievement in a country?
Answer. Some of the indicators of educational achievement in a country are; adult literacy level, primary education completion rate, and youth literacy rate.
Question 3. Why do we observe regional differences in educational attainment in India?
Answer. The per capita education expenditure differs from one state to another. In 2009-10, it was as high as Rs. 12,500 in Himachal Pradesh and as low as Rs. 2200 in Punjab. The disparity in per capita educational expenditure is the reason for regional differences in educational attainment in India.
Question 4. Bring out the differences between human capital and human development.
Answer. Human capital and human development may sound similar but there are differences between them. Human capital considers education and health as a means to increase labor productivity. Human development is based on the idea that education and health are integral to human well being because only when the people have the ability to read and write and can live a healthy and long life, they will be in a better position to make choices. Human capital considers human beings as a means to an end. In this case, improved productivity is the end. Human development considers human beings as an end. From the perspective of human capital, if investment in education and health does not result in improved productivity then that investment is unproductive. Human development considers investment in health and education should be increased even if it does not result in apparent productivity.
Question 5. How is human development a broader term as compared to human capital?
Answer. Human capital looks at only one aspect, i.e. productivity of labor. Human development looks at various other aspects which encompass quality of life of individual and of society. Human capital looks at short-term gains, while human development looks at long-term gains. Hence, it is apparent that human development is a broader term compared to human capital.
Question 6. What factors contribute to human capital formation?
Answer. Investment in education, healthcare, on the job training, migration, etc. are the factors which contribute to the human capital formation.
Question 7. How government organizations facilitate the functioning of schools and hospitals in India?
Answer. The government organizations see to it that the private providers of these services adhere to certain standards and charge standard prices. Moreover, government institutions also facilitate the opening and running of government-owned educational institutions and hospitals so that the masses can be provided with the benefits of these services.
Question 8. Education is considered to be an important input for the development of a nation. How?
Answer. It is a fact that an educated person earns a higher income than an uneducated manual laborer. In a factory, a shop-floor worker earns much less than people at managerial level and this difference is because of the difference in skills and education. To understand it better, we can compare the situation in India with that in Ireland. It is said that Ireland is a country which uses its knowledge economy very efficiently. If India begins to use its knowledge economy as efficiently as Ireland does then it’s per capita income would improve from the current level of $ 1,000 to $ 3,000 by 2020. This illustrates why education is considered to be an important input for the development of a nation.
Question 9. Discuss the following as a source of human capital formation
Answer. Investment on health infrastructure helps in making healthy citizens which can lead a long life. A healthy worker would be in a position to utilize the maximum number of working days and hence his productivity would be better than an unhealthy worker. Thus, health infrastructure is an important source of human capital formation.
Expenditure on migration
Answer. People often migrate in search of better employment opportunities. Migration involves various costs. One of the costs involved in migration is the cost of travel. Another cost is the higher cost of living in a bigger place. Additionally, migration also involves the psychological costs of settling in an alien cultural environment.
Question 10. Establish the need for acquiring information relating to health and education expenditure for the effective utilization of human resources.
Answer. Information relating to health and education expenditure reveals many aspects. It shows a relative number of people who can afford education and healthcare expenses and those who cannot. This figure can be utilized in deciding the current number of available human resources. This figure also helps in deciding the section of the society which needs help from government agencies. Thus, information relating to health and education expenditure is essential for effective utilization of human resources.
Question 11. How does investment in human capital contribute to growth?
Answer. Human capital is a means to achieve and improve economic productivity. Investment in human capital helps in building the human capital for the economy. Investment in education helps in preparing qualified and skilled human resources. Similarly, investment in health helps in preparing healthy human resources which can be better at productivity. A better productivity of the human resources helps in economic growth of the nation.
Question 12. ‘There is a downward trend in inequality worldwide with a rise in the average education levels’. Comment.
Answer. Education opens new avenues of employment. It is beyond doubt that an educated person has better chances of landing a high paying job. Even if a person decides to become an entrepreneur, education level helps in doing a business in a better way. Throughout the world, education levels have risen over the years. This has resulted in the participation of more people in the workforce. Rising number of women in the workforce can be a clear indicator of benefits which education can impart towards employability. In the case of India, many sections of the society which were downtrodden and oppressed since ages have been able to improve their socio-economic status because of education. All these developments have helped in reducing the inequality between the rich and the poor.
Question 13. Examine the role of education in the economic development of a nation.
Answer. If we carefully analyze the data given in this chapter, it is clear that literacy level has risen from about 17% in 1951 to 74% in 2010. During this period, life expectancy has increased and child mortality has reduced substantially. In view of these figures, it can be inferred that a better education level has helped in achieving a better quality of life and more productive workforce. Per capita income which was Rs. 5,700 in 1951 has risen to 38,000 in 2010; a whopping growth of 400%. Per capita income is a good indicator of economic development of a nation. Hence, it can be said that education has an important role to play in the economic development of a nation.
Question 14. Explain how investment in education stimulates economic growth.
Answer. It is difficult to develop a causality of investment in education on economic growth. But the Seventh Five Year Plan correctly says that a large population can itself become an asset if it is trained and educated on sound lines. To understand this, let us take an example from real life. Almost all parents invest maximum in their children’s education. They know that if a child is educated properly, he stands a better chance of earning a livelihood so that he can spend a decent life. You will find many examples in which a child from a poor family entered the leading educational institution of India and thus could improve his and his family’s economic condition. It is important to remember that when a person excels in his chosen field and improves his income, he also contributes to the economic growth of the nation. The data discussed in the previous question also reveals that investment in education stimulated economic growth.
Question 15. Bring out the need for on-the-job-training for a person.
Answer. On the job training is very important for any job. It involves training the person suitable skills which are relevant to the job. Responsibilities and challenges keep on changing in a job and hence, on the job training is a continuous process. By providing on the job training an organization ensures that the employee becomes more skillful and thus more productive.
Question 16. Discuss the need for promoting women’s education in India.
Answer. India is a patriarchal society in which there is too much gender-based discrimination. Most of the thinkers believe that educating a woman helps in educating the family and subsequently the society. Women’s education is found to have a positive effect on reducing the family size as it helps in reducing fertility. As the example of developed nations show, greater participation of women in the workforce helps in economic growth of the nation.
Question 17. Argue in favor of the need for different forms of government intervention in the education and health sectors.
Answer. As this chapter shows, investment in education and health is important for human capital formation. But normal consumers usually do not have enough information about the institutions which provide these services. Private providers of these services often acquire the monopoly status.
Question 18. What are the main problems of human capital formation in India?
Answer. Some of the problems of human capital formation in India are discussed as follows. A large section of the population is so poor that is cannot afford even the basic education and healthcare facilities. Most of the people cannot afford to get treatment at super specialty hospitals. Similarly, most of the people cannot afford to get a higher education. The government expenditure on education and healthcare has been increasing over the years but in terms of percentage of GDP, it is not adequate.
Question 19. In your view, is it essential for the government to regulate the fee structure in education and healthcare institutions? If so, why?
Answer. Profit maximization is a major goal of most of the private institutions. More often than not, private institutions in education and healthcare sector indulge in exploitation of their consumers. As we know most of the people are not in a position to afford the expenses for these institutions. Moreover, education and healthcare not only provide benefit to the individual but to the whole society. Hence, it is essential for the government to regulate the fee structure in education and healthcare institutions.