HUMAN CAPITAL FORMATION IN INDIA

INTRODUCTION

• Economic development of a country depends not only on physical resources like land, machinery, and technology, but also on the quality of its people.
• Human beings are both:
  • Means of production (workers, professionals, entrepreneurs)
  • End of development (better living standards, welfare)
• Investment in people through:
  • Education
  • Health
  • Skill development
    leads to Human Capital Formation.
• India, with a large population, has immense potential to convert its population into productive human capital.
• This chapter explains:
  • Meaning of human capital
  • Difference between human capital and human development
  • Status of human capital formation in India
  • Role of education
  • Future prospects

WHAT IS HUMAN CAPITAL?

Meaning of Human Capital

• Human capital refers to:
  • Stock of skills
  • Knowledge
  • Experience
  • Education
  • Health
    possessed by individuals.
• It enhances the productive capacity of people.
• Unlike physical capital, human capital is embodied in humans.

Human Capital Formation

• Human capital formation means:
  • Adding to the stock of human capital through investment.
• It involves:
  • Education
  • Training
  • Health care
  • Nutrition
  • Migration
  • Information

Sources of Human Capital Formation

1. Investment in Education

• Most important source.
• Improves:
  • Knowledge
  • Skills
  • Innovation ability

2. Investment in Health

• Healthy workers are more productive.
• Reduces absenteeism.
• Increases life expectancy.

3. On-the-Job Training

• Training during employment.
• Enhances practical skills.

4. Migration

• People migrate for better jobs and education.
• Leads to better utilisation of human skills.

5. Information

• Access to information improves decision-making.
• Helps in choosing better education and jobs.

HUMAN CAPITAL AND HUMAN DEVELOPMENT

Meaning of Human Development

• Human development refers to:
  • Improvement in quality of life
  • Expansion of people’s choices
• It includes:
  • Health
  • Education
  • Living standards
  • Freedom
  • Equality

Difference Between Human Capital and Human Development

Relationship Between Human Capital and Human Development

• Human capital contributes to:
  • Higher income
  • Economic growth
• Human development ensures:
  • Better health
  • Education
  • Living conditions
• Both are complementary.
• Investment in human capital leads to human development.

STATE OF HUMAN CAPITAL FORMATION IN INDIA

1. Population Size and Growth

• India has one of the largest populations in the world.
• Large population can be:
  • An asset (demographic dividend)
  • A liability (if unskilled and unhealthy)

2. Education Indicators

Literacy Rate

• Literacy rate has improved over the years.
• Still lower compared to developed countries.

Gender Gap

• Female literacy is lower than male literacy.
• Regional disparities exist.

3. Health Indicators

Life Expectancy

• Life expectancy has increased.
• Reflects improvement in health facilities.

Infant Mortality Rate (IMR)

• IMR has declined.
• Still high in rural and backward areas.

Maternal Mortality Rate (MMR)

• Gradual decline due to better healthcare services.

4. Skill Development

• India faces a skill mismatch.
• Many educated people lack employable skills.
• Vocational and technical education is inadequate.

5. Public Expenditure on Education and Health

• Government spending on:
  • Education is around 3–4% of GDP.
  • Health is around 1–2% of GDP.
• Lower than recommended levels.
• Private expenditure is high, leading to inequality.

6. Regional Imbalances

• States like:
  • Kerala, Tamil Nadu show better indicators.
• States like:
  • Bihar, Uttar Pradesh lag behind.

EDUCATION SECTOR IN INDIA

Role of Education in Human Capital Formation

• Education:
  • Improves productivity
  • Enhances innovation
  • Promotes social equality
• Acts as an instrument of:
  • Economic growth
  • Social change

Structure of Education in India

1. Elementary Education

• Focus on basic literacy and numeracy.
• Schemes:
  • Right to Education (RTE)
  • Mid-Day Meal Scheme

2. Secondary Education

• Develops skills and discipline.
• Bridge between basic and higher education.

3. Higher Education

• Universities, colleges, technical institutions.
• India has one of the largest higher education systems.

Government Initiatives in Education

• Right to Education Act
• Sarva Shiksha Abhiyan
• Rashtriya Madhyamik Shiksha Abhiyan
• National Education Policy (NEP)

Problems in Education Sector

• High dropout rates
• Poor quality of education
• Teacher shortages
• Inadequate infrastructure
• Rural-urban disparity

FUTURE PROSPECTS

1. Demographic Dividend

• India has a young population.
• Proper education and skill development can boost growth.

2. Skill Development Programs

• Skill India Mission
• Vocational training initiatives
• Digital education platforms

3. Increased Public Investment

• Need to increase spending on:
  • Education
  • Health
• Focus on quality, not just quantity.

4. Technological Advancement

• Use of:
  • Online education
  • Digital health services
• Improves access and efficiency.

5. Inclusive Human Capital Formation

• Focus on:
  • Women
  • Rural population
  • Marginalised sections

CONCLUSION

• Human capital formation is essential for:
  • Economic growth
  • Social development
• India has immense potential due to its large population.
• Challenges:
  • Low public spending
  • Skill gaps
  • Regional inequalities
• With proper policies and investment:
  • Population can be converted into productive human capital.
• Sustainable development requires:
  • Investment in education
  • Improved healthcare
  • Skill-oriented training
• Human capital is the foundation of India’s future growth.