Commerce Exam  >  Commerce Notes  >  Economics Class 12  >  Chapter Notes - Human Capital Formation in India

Human Capital Formation in India Class 12 Economics

Human Capital

  • Human capital is the collective stock of skills, abilities, expertise, education, and knowledge within a nation at a given point in time. Investment in human capital is essential to develop and cultivate more human capital from available human resources.
  • To produce qualified educators and other specialists, nations must have sufficient human capital that is educated and qualified. This human capital can create other human capital, such as doctors, engineers, professors, etc., who will later become valuable human assets and contribute to the economy of the country.

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Sources of Human Capital Formation

  • Expenditure on Education
  • Expenditure on Health
  • On-the-Job Training
  • Study Programmes for Adults
  • Migration
  • Expenditure on Information

Induction Training

  • This type of training is provided to newly recruited employees to help them become familiar with the workings of the organisation. It helps new employees adjust and become familiar with their tasks and responsibilities in the organisation.

Coaching

  • In this method, new employees are assigned an experienced manager who acts as a coach. The coach guides the employees to observe their approach towards work, solve problems, and find solutions to complex problems.

On-the-Job-Training

  • In this method, employees learn a job by performing it on a real-time basis while learning and developing expertise at the same time.

Migration

  • Migration refers to the movement of people from one area to another or from one country to another, usually across political and administrative borders. It affects the growth of the population of a region by increasing or decreasing the number of people living there. Migration can be permanent, temporary, or daily.

Off-the-Job-Training

  • This type of training requires employees to leave their workplace and concentrate their entire time on the training objectives.

UGC

  • The University Grants Commission (UGC) of India is a statutory organisation established in 1953 under the Ministry of Human Resource Development. Its head office is located in New Delhi. The UGC is responsible for coordinating, determining, and maintaining standards of higher education. It also provides recognition to universities in India and disburses funds to recognised universities and colleges.

Physical Capital 


Physical capital is one of the crucial elements in the production process, alongside labor and natural resources. It encompasses man-made items such as machinery, buildings, equipment, and more. These goods are used in the production process to transform raw materials into finished products. A substantial investment in physical capital is often required for new projects.

Difference between Physical Capital and Human Capital :-

Human Capital Formation in India Class 12 Economics

Human capital formation is the process of adding to the stock of human capital over a period of time.

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Human Capital Formation & Human Development

  • Formation of Human Capital - The term "human capital formation" refers to the process of increasing the stock of human capital over time. This involves acquiring and enhancing the skills, knowledge, and experience of individuals, which is crucial for the growth and development of an economy.
  • Development of Human Capital - The concept of "human development" is based on the idea that education and health are fundamental human rights, and people can only fully realize their potential when they have access to these basic necessities. This enables individuals to apply their knowledge and skills for their own benefit and contribute to the overall development of society.

Role of human capital formation in economic growth.

  • Increases production levels
  • Alters the emotional and physical conditions for growth.
  • Improves the overall quality of life.
  • Raises life expectancy rates.
  • Enhances innovative skills.
  • Promotes social justice and equality.

Problems facing human capital formation.

  • Population growth
  • Gender and regional inequality
  • Brain drain (emigration of highly skilled individuals)
  • Inadequate manpower planning
  • Lack of on-the-job training in agriculture
  • High levels of poverty
  • Low academic standards

Education


This refers to the process of imparting knowledge, skills and training, particularly in educational institutions such as schools and colleges, in order to enhance one's knowledge and abilities.

Importance and objectives of education

  • Education plays a vital role in producing responsible citizens.
  • (Education facilitates efficient utilization of resources within a country.
  • Education helps in the development of science and technology.
  • Education broadens people's mental horizons and perspectives.
  • Education promotes cultural standards and awareness among citizens.
  • Education plays a crucial role in the development of human personality.

Problems relating to development of education in India

  • Large number of illiterates.
  • Inadequate vocationalisation.
  • Gender bias.
  • Low rural access level.
  • Low government expenditure on education.

The objective of the All India Council for Technical Education (AICTE), which operates under the Ministry of Human Resource Development, is to ensure proper planning and development of the technical education system in India. AICTE functions as a statutory authority responsible for designing, formulating, and maintaining norms and standards.

  • To provide quality assurance through accreditation.
  • To monitor, evaluate and provide funding for the priority areas.
  • Maintaining parity of certification and awards.
  • To manage and develop the technical education system of India.

Future Prospects

  • Universal Education – Despite progress in increasing literacy rates, India still has a significant number of illiterate people. The Indian Constitution mandates free and compulsory education for all children up to the age of 14, but this goal has yet to be achieved. Prioritizing education for all is essential to achieve 100% adult literacy in India.
  • Gender Equality – While there has been progress in narrowing the gender gap in literacy rates, promoting education for women is crucial to improving their economic independence and social status. Educating women also has a positive impact on fertility rates and healthcare for women and children.
  • Higher Education – The Indian education system has a steep pyramid, with few individuals reaching higher education levels. Unemployment rates among educated youth, particularly for young rural female graduates, are high. The government needs to increase funding for higher education and improve the standard of higher education institutions to provide students with employable skills.

In order to enhance its economic and social outcomes for the people, India must prioritize education for all and reach its full potential.

Conclusion 

  • It is widely acknowledged that human capital formation and human development have significant economic and social benefits.
  • The central and state governments in India have been allocating substantial financial resources for the development of education and healthcare sectors.
  • It is important to ensure that education and healthcare services are accessible across different segments of society, in order to achieve both economic growth and equity simultaneously.
  • India possesses a substantial pool of scientific and technical talent, which is recognized worldwide. However, there is a need to improve the quality of this talent and create an environment that allows them to be utilized within the country.
The document Human Capital Formation in India Class 12 Economics is a part of the Commerce Course Economics Class 12.
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FAQs on Human Capital Formation in India Class 12 Economics

1. What is human capital formation?
Ans. Human capital formation refers to the process of acquiring and improving the skills, knowledge, and abilities of individuals in order to enhance their productivity and contribution to economic growth.
2. What are the sources of human capital formation?
Ans. There are several sources of human capital formation, including education, training programs, on-the-job learning, research and development activities, and investments in healthcare and nutrition.
3. How does physical capital contribute to human capital formation?
Ans. Physical capital, such as machinery, infrastructure, and technology, plays a crucial role in human capital formation. It provides the necessary tools and resources for individuals to acquire and enhance their skills and knowledge, thereby increasing their productivity and contributing to economic growth.
4. What is the relationship between human capital formation and human development?
Ans. Human capital formation and human development are closely interconnected. Human capital formation is a means to achieve human development, which encompasses the broader aspects of well-being, such as health, education, and living standards. By investing in human capital formation, societies can improve human development outcomes.
5. What are the future prospects of human capital formation in India?
Ans. The future prospects of human capital formation in India are promising. The country has been making significant efforts to improve its education system, skill development initiatives, and healthcare infrastructure. These investments are expected to enhance the human capital of the population, fuel economic growth, and contribute to overall development.
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