Kerala Plus One Economics Notes Chapter 5 Human Capital Formation in India
Human capital is defined as human resource where people as a capital asset which yields a stream of economic benefit over their working span of life. Converting human beings through education and training into human resources like teachers, doctors, scientists, etc. can be termed as human capital formation.
Sources of Human Capital
Sources of human capital can be classified into five. They are given below:
1. Investment in Education: Investment in education is considered as one of the main sources of human capital. Education increases the efficiency and productivity of the population which will enhance welfare of people and facilitate growth and economic development.
2. Investment in Health: Good health of a person helps him to produce goods and services to his optimum level. Therefore, spending on health to improve the health status of the population is in other way of spending on human capital.
3. Investment in Job Training: On-the-job training under the supervision of skilled professionals increases productivity. Expenditure regarding on the job-training is a source of human capital formation as the return of it is in the form of enhanced labour productivity.
4. Migration: Migration means movement of people from one place to another. Migration happens due to marriage, education and employment. People migrate in search of jobs that fetch them higher salaries than what may get in their native places. In India, rural-urban migration is very rampant in which rural people migrate to cities in search of better jobs.
5. Investment in Information Acquisition: People spend to obtain information regarding labour market and other markets like education and health. This information is necessary to make decisions regarding investments in human capital for efficient utilization of the acquired human capital stock. So, expenditure incurred for acquiring information relating to labour market is also a source of human capital information.
Human Capital and Economic Growth
Human capital is essential for economic growth. We know that the labour skill of an educated person is more than that of an uneducated person and that the former generates more income than the latter. Economic growth means thd increase in real national income of a country; naturally, the contribution of the educated person to economic growth is more than that of an illiterate person. If a healthy person could provide an uninterrupted labour supply for a longer period of time, then health is also an important factor for economic growth. Thus, both education and health, along with many other factors like on-the-job training, job market information and migration, increase an individual’s income-generating capacity.
Human Capital and Human Development
Human capital considers education and health as a means to increase labour productivity. Human development is based on the idea that education and health are integral to human well-being. When people attain certain ability to read and write and acquire ability to lead a long and healthy life, their productivity will go up. Human welfare should be increased through investments in education and health. Education and health improve human welfare. In a welfare state, every individual has right to get basic right to be literate and lead a healthy life.
Human Capital Formation in India
We have seen that human capital formation is essential for economic growth and development. Various institutions are operating in India for human capital formation. They are
- NCERT (National Council of Educational Research and Training) regulates school level education.
- UGC (University Grants Commission) regulates higher education (colleges, universities, and research institutes).
- AICTE (All India Council of Technical Education) regulates technical education.
- ICMR (Indian Council for Medical Research) regulates medical education.
Educational Achievements in India
India made significant improvements in the education sector since independence. Our literary rate was 18.3% in 1951. It increased to 74% in 2011. Similarly, the number of students seeking higher education increased in the country. The government also enacted the Right to Education Act in 2010 to ensure free and compulsory education for children.