Test: Human Capital Formation In India - 1 - UPSC MCQ

The University Grants Commission (UGC) is responsible for coordinating, determining, and maintaining standards of higher education in India. It plays a crucial role in ensuring the quality and recognition of universities, as well as the disbursement of funds to recognized educational institutions.

Human Capital Formation refers to the process of increasing the stock of human capital over time by acquiring and enhancing skills, knowledge, and experience.

According to the concept of human development, education and health are considered fundamental human rights, enabling individuals to realize their potential.

Human capital formation enhances skills, productivity, and can aid business growth and societal change. However, it doesn't inherently increase production costs; in fact, it often leads to long-term efficiencies.

Therefore, option D is the correct answer as it does not represent a merit of human capital formation.

• Human capital formation refers to the process of turning human resources into valuable skills and knowledge that enhance productivity.
• Overall, human capital is vital for economic growth as it increases productivity and innovation, ultimately benefiting society as a whole.

India must prioritize education and healthcare accessibility across society to achieve economic growth and equity simultaneously.

Expenditure on on-the-job training is a vital source of human capital formation for several reasons:

• It enhances the skills of employees, making them more productive.
• Firms invest in training to ensure that the output of workers exceeds the cost of training.
• On-the-job training can take place in various forms, such as:
  • Training within the company under the guidance of experienced staff.
  • External training programmes that workers attend.
• Companies often require employees to stay for a specific period post-training to recover their investment through increased productivity.
• The return on this training investment is typically greater than the initial costs, leading to overall economic growth.

Physical capital and human capital are two distinct forms of capital with key differences:

• Separation from Owner: Physical capital, such as machinery, can be separated from its owner. In contrast, human capital, which includes skills and knowledge, is inherently tied to the individual.
• Mobility: Physical capital is generally mobile across borders, subject to trade regulations. Human capital, however, faces restrictions due to nationality and cultural factors, limiting its movement.
• Market Presence: Physical capital can be sold directly in the market. Human capital is not sold; instead, the services provided by individuals with human capital are what can be offered in the market.
• Depreciation: Both types of capital depreciate over time, but the nature of this depreciation differs. Physical capital may become obsolete due to technological advancements, while human capital can diminish with age but can be preserved through continuous education and health investments.
• Benefits: Human capital generates both private and social benefits. For example, an educated individual can contribute to societal progress, while physical capital primarily yields private benefits for its owner.

In summary, while both forms of capital are essential for economic growth, they differ significantly in their characteristics and impacts on society.

Despite progress, India still has a significant number of illiterate people, and achieving 100% adult literacy is an ongoing goal.

Government intervention is crucial in the education and health sectors in India for several reasons:

• Long-term Impact: Investments in education and health have significant long-term effects that cannot be easily reversed.
• Information Asymmetry: Individuals often lack complete information about the quality and costs of services, making them vulnerable to exploitation.
• Monopoly Power: Without regulation, providers may gain monopoly power, leading to substandard services and unfair pricing.
• Access to Services: Many citizens, especially those from economically disadvantaged backgrounds, cannot afford basic education and healthcare.
• Government Responsibility: It is essential for the government to ensure that education and health services are available and affordable for all, particularly for the underprivileged.

In India, various government bodies, such as the ministries of education and health, play a vital role in overseeing these sectors. They set standards, regulate pricing, and ensure that services are delivered effectively.