HUMAN CAPITAL FORMATION IN INDIA class 12 Indian economy revision notes

HUMAN CAPITAL FORMATION IN INDIA

HUMAN CAPITAL - MEANING, ELEMENTS

 Meaning of Human Capital:

Human capital is the stock of of knowledge, habits, social and personality attributes, including creativity, embodied in the ability of an individual to perform labor so as to produce economic value.

Alternatively, Human capital is a collection of resources—all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively by individuals in a population. These resources are the total capacity of the people that represents a form of wealth which can be directed to accomplish the goals of the nation or state or a portion thereof.

Alternatively, Human Capital as the aggregation of the innate abilities and the knowledge and skills that individuals acquire and develop throughout their lifetime.

 Elements of Human Capital:

There are basically three elements of Human Capital are as follows.

(a) People (b) Skill © Role Played  Characteristics of Human Capital  Human capital comprises an innate and an acquired component.  Human capital is a non-tradable good.

 Human capital can be acquired either formally or informally.

 Human capital has qualitative as well as quantitative aspects.  Human capital can be either general or specific.

HUMAN CAPITAL AND PHYSICAL CAPITAL

v Difference between Human Capital & Physical Capital

Basis	Human Capital	Physical Capital
Meaning	Human capital is the stock of knowledge , skill and productivity embodied in human being	Physical capital is the stock of physical assets which helps in further production process
Tangibility	It is intangible	It is tangible
Separable	It cannot be separated from its owner	It can be separable from its owner
Returns	Investments in Human capital generate both pecuniary and non-pecuniary returns	Investments in physical capital generate only pecuniary returns
Depreciation	It depreciates slowly , but can be restored through training	It depreciates rapidly with time
Superiority	It is superior to Physical capital give rise to another Human Capital	It is inferior to Human capital as it can be used only by the help of Human Capital

HUMAN CAPITAL FORMATION - MEANING, STRATEGY

 Meaning of Human Capital Formation: Human Capital formation is the process of addition to the stock of knowledge, sill and productivity of human being.

 Strategy for Human Capital Formation: According T.W. Schultz, there are five ways of developing human capital.

a. Provision of health facilities which affect the life expectancy, strength, vigor and vitality of the people.

b. Provision of on the job training which enhances the skill of labor force.

c. Arranging education at the primary, secondary and higher levels.

d. Study and extension programmer for the adults.

e. Provision of adequate migration facilities to families to adjust to changing job opportunities.

SOURCES OF HUMAN CAPITAL FORMATION

The sources of human capital formation are as follows.

v Investment on education:

v Investment on Health:

v Investment on on-the –job training:

v Investment on acquiring Information:

v Investment on Migration:

IMPORTANCE OF HUMAN CAPITAL FORMATION

The significance of the human capital can be assessed from the following arguments.

 Better use of Capital Goods:

 Better use of Improved Knowledge:

 Modernization of Attitudes:

 Economic Growth:

 Effective use of physical capital:

 Increases life expectancy:

 Improves Quality of life:

 Control of population growth:

v Problems of Human Capital Formation in India:

 The main problems of human capital formation in less developed countries like India in brief are as under.

 1. Faster increase in population.

 2. Defective pattern of investment in education. In the developing

 3. More stress on the provision of building and equipments.

 4. Shortage of health and nutrition facilities.

 5. No facilities of on the job training.

 6. Study programme for adults.

 7. Half hearted measures for promotion of employment.

 8. No manpower planning.

 9. Neglect of agriculture education.

PROSPECTS OF HUMAN DEVELOPMENT IN INDIA

Ø The seventh five year plan stressed upon the importance of human capital.

Ø In India, ministry of education at the centre and state level NCERT, (National Council of Educational Research and Training), UGC (University Grants commission) , AICTE (All India Council of Technical Education) Regulate the education sector.

Ø In India, Ministry of Health at the union and the State level and ICMR (Indian Council of Medical Research) regulate the health sector.

Ø World Bank states that India will become the knowledge economy. Also if India uses its knowledge as much as Ireland does, than the per capita income will rise $ 3000 by the year 2020.