HUMAN CAPITAL FORMATION IN INDIA

Human Capital

It refers to the stock of skill, ability, expertise, education and knowledge

involved in the people.

• Two Major Sources of Human Capital in Country

1) Expenditure on Education: 

It is one of the most important sources of human capital

formation. Investment in education is not only highly productive but also it is yields

increasing return and accelerates economic growth of all the resources education receives

most importance because it gives maximum contribution to the development of the

country.

2) Expenditure on Health:

 Health is an important input for a development of a nation.

Expenditure on health is needed in the following areas. A sick labourer without access to

medical facilities is compelled to abstain from work and there in a loss of productivity.

The various forms of health expenditure are preventive medicine, curative medicine,

social medicine, provision of clean drinking water, etc.

• Importance of Human Capital Formation

1) Education facilitates use of resources in the country:

 Human capital formation raises

the productivity and production as knowledgeable and skilled worker makes the better

(use of the resources). Increase in productivity and quality production depends on

technical skill of the people which can be acquired only by education or training and

maintaining health of the people.

2) Control of population growth:

 It has been observed that educated persons have smaller

families as compared to illiterate families, So, spread of education is necessary to control

the population growth rate.

3) Improves Quality of life: 

The quality of population depends upon the level of education

health of a person and skill formation acquired by the people. Human capital formation

not only makes people productive and creative but also transforms the lives of the people.

4) Increases life expectancy: 

Formation of human capital raises life expectancy of the

people. Health facilities and availability of nutritive food enable people to live a healthy

and long life. This in turn, adds to the quality of life.

5) Effective use of physical capital:

 Its growth and productivity depends on human

capital formation.

• Reasons for Poor Human Capital Formation

1) Insufficient Resources: 

The resources allocated to the formation of human capital have

been much less than the resources required for meeting the educational & health needs of

the country. Due to this reason, the facilities for the formation of human capital have

remained grossly inadequate.

2) Serious Inefficiencies: 

There are a lot of wastages of society’s resources as capabilities

of educated people are either not made use of in case of unemployment or are

underutilized in case of unemployment. Massive literacy, non-education of many

children, poor health facilities are other inefficiencies, which have not been attended to

adequately & properly.

3) High Growth of population:

 The continuous rise in population has adversely affected

the quality of human capital.

4) Lack of proper manpower planning:

 There is an imbalance between the demands for

the supply of human resources of various categories, especially in case of highly skilled

personnel. The absence of such balancing has resulted in the wastage of resources.

5) High Poverty Levels:

 Majority of population falls below poverty line affecting the human capital formation.

Physical Capital

It refers to all those inputs which are required for further production, like plant and

machinery, factory, buildings, raw materials, etc.

 Difference Between Human Capital and Physical Capital

 Difference between Human Capital and Human Development