Rough Draft

Name: - DAX SHAH

Class: - 12th C
Roll No.: - 6

Topic: - HUMAN CAPITAL FORMATION IN INDIA

WHAT IS HUMAN CAPITAL?

Human capital refers to the economic value of a worker’s experience
and skills. It encompasses various assets, including:

1.
2. individual.
3. Skills: Abilities and competencies that contribute to
productivity.
4. Intelligence: Cognitive abilities and problem-solving skills.
5. Health: Physical well-being, which impacts work performance.
6. Other qualities valued by employers, such
as loyalty and punctuality.

What are the sources of human capital?

Sources of Human capital formation
(1) Expenditure on Education
Investment in education is considered the main source of human capital formation.
  Education is the process of teaching, learning, and training especially in
schools or colleges to improve knowledge and develop skills.
 Education;
 Confers higher-income capacity on people.
 Provides knowledge to understand the changes taking place in society.
 Stimulates invention and innovation.
 Facilitates adoption of new technologies.
 Expenditure on Education is a way of enhancing and enlarging a
productive workforce in a country.
 The Labour skill of an educated person is more than an uneducated
person because education generates technical skills and creates
manpower that is suited for improving labor productivity.
 Spending on education by individuals is similar to spending on capital
goods by companies to increase future profit over some time.
 The difference between the benefit and cost of education measures the
market value of human capital formation.
(2) Expenditure on Health
Health is a state of complete physical, mental and social well-being.

 Expenditure of Health includes;

 Preventive medicine (vaccination)
 Curative medicine (during illness)
 Social medicine (spreading of health literacy)
 Provision of clean drinking water
 Good sanitation facilities
 Poor health and underemployment adversely affect the quality of
manpower because sick labor, without access to medical facilities, is
forced to abstain from work, which causes loss in productivity.
 On the other hand, adequate food and proper nourishment to people
along with adequate health and sanitation facilities lead to improvement
of quality of human capital.
 Thus, a healthy person contributes to a country’s GDP more than an
unhealthy person.
 Health expenditure directly increases the physical and mental ability of
human beings and produces a healthy labor force and thus, it is an
important source of human capital formation.
(3) Expenditure on the Job Training
 Many firms spend on giving on the job training to their workers and it
may take place in two following ways;
 Workers may be trained in the firm itself under the supervision of a
skilled worker.
 Workers may be sent for off-campus training.
 On job training
  Enable workers to absorb new technology and ideas.
 Help workers to enhance their specialized skills.
 Help workers acquire new technological skills.
 It increases the skills and efficiency of the workers and further leads to
an increase in production and productivity.
 The return of expenditure on such training in the form of enhanced labor
productivity is more than the cost of it.
(4) Expenditure on Migration
People migrate from one place to another in search of jobs that fetch them higher
salaries as compared to their native incomes.

 Unemployed people from rural areas migrate to urban areas in search of

jobs (leading to utilization of inactive skills) and technically qualified
persons like doctors, engineers, etc. migrate to other countries for higher
salaries (leading to better utilization of skill).
 Migration involves the cost of transportation and cost of living in the
migrated place but increased earnings at the new place outweigh the cost
of migration.
 Thus, migration is a source of human capital formation as it facilitates
the utilization of inactive skills and fuller utilization of skills.
(5) Expenditure on acquiring information
 People spend to acquire information regarding the labor market and
educational institutions. For example, the level of Salary is associated
with various types of jobs so that they can choose the right job. Or,
educational institutions which are providing the right type of educational
skill, their standard, and cost, etc.
 This kind of information is necessary to make decisions regarding
investment in education as well as for efficient utilization of the
acquired skills and enable people to actualize their productive potential.
 Thus, expenditure on acquiring all sorts of information regarding labor
markets and other markets like education and health is also a source of
human capital formation.
Problems faced by human capital formation
 Insufficient resources
 Rising population
 Brain drain- Skilled and educated persons who have high caliber when
migrating to developed countries in search of better job opportunities.
 Lack of proper manpower planning.
 Insufficient on the job training in the agricultural sector
 Human capital formation and Economic
growth
 Casualty between human capital formation and economic growth flows
in either direction.
 That is, higher income causes the building of a high level of human
capital and vice-versa,i.e. high level of human capital causes growth of
income.
 Human capital is important in many ways;
 It makes the efficient use of physical capital stimulates higher
productivity and production.
 It stimulates innovation and invention.
 It brings a positive change in the outlook and attitude of people.
 It improves the quality of life.
 It ensures a higher rate of participation and social justice.
 There is a cause-and-effect relationship between human capital
formation and economic growth. Human capital formation increases
efficiency and productivity by enhancing knowledge and skills which
lead to economic growth. On the one hand, economic growth implies an
increase in per capita income which facilitates higher investment in
education and health and promotes human capital formation.

Human capital and human development

Human capital Human development

It is a narrow concept that treats

Human development is a broader concept that treats human
human beings as a means to achieve
beings as ends.
an end of higher productivity.

It is based on the idea that education and health are integral to

It considers education and health as
human beings. Only when people can read and apply their
a means to increase labor
knowledge to derive maximum benefit will they be able to lead
productivity.
a long and healthy life.

Education Sector of India – Human Capital

Formation
Importance of education
 Education is a very important source of human capital formation. It is a
wider term than literacy.
 Importance of education
 It produces good and responsible citizens of the country.
 It facilitates the efficient use of natural and human resources.
 It develops the mental horizon of the pound helps PSP in promoting
rational and scientific thinking of the people.
 It enables greater participation of the people in the process of economic
growth or development.
 It helps in developing the necessary skills for the smooth functioning of
the economy.
 Develops science and technology and also stimulates invention and
innovation.
Need for government intervention in education and health
There are many reasons why the government should intervene in the process of
providing education and health facilities to the people. Some of them are;

 People do not have complete information about the quality of the

services and their cost.
 Expenditure on education and health make a long-term impact and they
cannot be easily reversed.
 Education and healthcare services create both private and social benefits
The existence of both private and public institutes in education and
health services is essential.
 The providers of education and health services may acquire monopoly
power and may exploit people. A large section of our population is
below the poverty line. So, they cannot afford to access expensive
education and healthcare facilities. Accordingly, these services would
remain beyond the reach of.
Thus, it is essential

 Government should provide these services to people free of cost or at a

reasonable cost.
 Government should ensure that the prosecutor provides high-quality
services at the correct price.

Regulatory Authority of India

1. Education Services
 Ministries of education at the union and state level.
 National council of educational research and training. (NCERT).
  University grants commission ( UGC).
 All India council of technical education. ( AICTE)
2. Health sector
 Ministries of health at union and state level.
 Indian council for medical research( ICMR).

Problems faced by the Education sector of India

 High illiteracy rate
 Gender bias
 Low access in rural areas
 Privatization
 Low quality of education

ACHIEVEMENTS IN EDUCATION SECTOR

(1)Elementary education-

 Elementary education covers students from 1st to 5th class in the age
group of 6-11 years (primary education) and from six to eight years in
the age group of 11 to 14 years( middle education).
 Thus, elementary education is the sum of primary and middle education.
 The gross enrolment ratio which stands for several students enrolled /
total number of children in the age group of 6 to 14 years, increased
from 43 % to 96.7 4 cm in 2009 – 10.
(2) Secondary education-

 Serves as a bridge between primary and higher education and prepares a

young person between the age group of 14 to 18 years for entry into
higher education.
 Institutions in secondary education have increased from 7.4
thousand(1950-1951) to 2.52 lakh in (2015-2016) and the number of
students has also increased from 15 lakh (1950-1951) to 3.2 crores
(2015-2016).
 Policies to promote secondary education;
 National council of educational research and training.
 Navodaya Vidyalaya
 Kendriya Vidyalaya
(3)Higher education –

 It refers to general, managerial, technical, medical, and other

professional education. It is most important for a country because it is a
powerful tool for building a knowledge-based society.
  Universities providing Higher education have increased from 27 (1950-
1951) to 799 in (2015-2016) and the number of students has also
increased from 3.6 lakh (1950-1951) to 346 lakh (2015-2016).
 Policies to boost higher education;
 University grants commission
 YOU
 CITE

FUTURE PROSPECTS
 Education for all: Still a distant dream
 Though literacy rates for both adults as well as youth have increased,
still the absolute number of illiterates in India is as much as India’s
population was at the time of independence.
 Gender equality: better than before
 The differences in literacy rate between males and females are
narrowing signifying a positive development in gender equity; still, the
need to promote education for women in India is imminent for various
reasons such as improving economic independence and social status of
women and also because women education makes a favorable impact on
the fertility rate and health care of women and children.
 Therefore, we cannot be complacent about the upward movement in the
literacy rates and we have miles to go in achieving cent percent adult
literacy.
 Higher education: A few takers
 The education pyramid of India is steep. That means the number of
students reaching the level of higher education is less than the number of
students enrolled at the primary level.
 Moreover, the level of unemployment among youth is the highest.

THANK YOU