Class 12 Economics Short Questions with Answers - Human Capital Formation in India

Q.1. Define human capital.
Ans. Human capital is the stock of knowledge and skills that make the workers productive.

Q.2. List the sources of human capital.
Ans. The sources of human capital are:
(i) Education
(ii) Health
(iii) On-the-job training
(iv) Labour market information
(v) Migration

Q.3. Why do individuals invest in education?
Ans. Individuals invest in education to increase their future income.

Q.4. What is the main reason for rural-urban migration?
Ans. Unemployment is the main reason for rural-urban migration.

Q.5. Define physical capital.
Ans. Physical capital refers to the manufactured assets used in the process of production such as machinery, equipment, buildings, vehicles, etc.

Q.6. List the benefits of education.
Ans. Following are the benefits of education:
(i) It gives a better social status and pride.
(ii) It enables wise decision-making.
(iii) It enhances social outlook and develops understanding to accept the changes taking place in society.
(iv) It stimulates innovations and facilitates adaptation of new technologies.

Q.7. Discuss the need for human capital.
Ans. The population of the nation takes charge of all economic activities such as production, distribution and consumption. Human capital, therefore, may be recognized as one of the production factors, which can generate additional values. An economy needs sufficient human capital in the form of educated, trained and competent people to function and accomplish its goals. As we move deeper into a knowledge-based economy that depends on information, knowledge and high-level skills, human capital becomes increasingly important.

Q.8. What are the different forms of health expenditure?
Ans. The different forms of health expenditure include expenditure on:
(i) Preventive medicine – medical practices which are designed to avoid or avert diseases
(ii) Curative medicine – health care practices that are used to treat patients with the intent of curing them, not just reducing their pain
(iii) Social medicine – medical practices concerned with the role of social factors in the occurrence, prevention and treatment of disease
(iv) Provision of clean drinking water
(v) Good sanitation

Q.9. Discuss the need for expenditure on information as a source of human capital.
Ans. People need to incur expenditure in order to acquire information related to equity markets, labour markets, education, health and other related markets. For instance, expenditure is incurred while collecting information related to education such form fees, transportation cost, consultancy fee, etc. Information plays an important role in making decisions regarding investments in human capital. Moreover, expense is incurred for efficient utilisation of the acquired stock of human capital. The money spent on obtaining information related to any kind of markets is a source of human capital formation.

Q.10. Define economic growth.
Ans. Economic growth refers to the increase in real national income of a country.

Q.11. List the indicators of educational achievement in a country.
Ans. The indicators of educational achievement in a country are:
(i) Adult literacy rate
(ii) Primary completion rate
(iii) Youth literacy rate
(iv) Net attendance ratio
(v) Teacher-pupil ratio

Q.12. What are the indicators used to measure the health status of a country?
Ans. The indicators used to measure the health status of a country are:
(i) Life expectancy rate
(ii) Mortality rate

Q.13. What are the advantages of human capital formation?
Ans. The following are the advantages of human capital formation:
(i) It increases efficiency and income generating capacity of labour.
(ii) It improves technical knowledge.
(iii) It enlarges the size of business.
(iv) It increases the level of production.
(v) It changes social outlooks.
(vi) It decreases cost of production.

Q.14. “Higher income leads to high level of human capital.” Comment
Ans. Higher income leads to development of high level of human capital and vice versa. In other words, high level of human capital leads to growth of income. It is believed that even a large population, which is trained and educated, can become an asset in accelerating economic growth and ensuring social change in desired directions. However, it is difficult to establish a relation of cause and effect from the growth of human capital to economic growth as the rate of growth human capital in developing countries has been faster than the rate of growth of per capita real income.

Q.15. Discuss India’s potential as a knowledge economy.
Ans. India has the potential to become a leading knowledge-based economy. With its youth population and growing information and communication technology (ICT) industry, India can become a major global knowledge-based economy. However, there is a need for measures such as:
(i) Supportive laws
(ii) Improved infrastructure
(iii) Removal of barriers to trade and investment
(iv) Up-skilling of labour force
(v) Higher spending in research and development
(vi) Innovative financing for small businesses and enterprises
A shift to knowledge-based growth would help developing country like India avoid the middle-income trap and also address the issue of rising income inequalities.

Q.16. Give an account of government’s expenditure on education.
Ans. During 1952–2012, education expenditure as percentage of total government expenditure increased from 7.92 to 11.7. As percentage of GDP, expenditure on education increased from 0.64% to 3.31% over the same period. However, the increase in education expenditure has not been uniform. The share of elementary education is the highest in the total education expenditure while that of higher/ tertiary education is the least.

Q.17. What initiatives have been taken by the government to provide equal access of education to all?
Ans. The following initiatives have been taken by the government to provide equal access of education to all:
(i) The Government of India enacted the ‘Right to Education Act’ in 2009 to make free education a fundamental right of all children in the age group of 6–14 years.
(ii) Government of India has started levying a 2 per cent ‘education cess’ on all Union taxes. The revenue earned from education cess is spent on elementary education.
(iii) The government sanctions a large outlay for the promotion of higher education and new loan schemes for students to pursue higher education.

Q.18. Why is the level of unemployment is the highest among educated youth?
Ans. The level of unemployment is the highest among educated youth as the standard of higher education institutions is very low.

Q.19. State the problems of human capital formation in India.
Ans. The problems of human capital formation are:
(i) High cost of human capital formation
(ii) Low levels of adult and agricultural education
(iii) Less priority to secondary education
(iv) Limited stock of human capital formation

Q.20. Why is it important to promote education for women in India?
Ans. It is important to promote education for women in India due to the following reasons:
(i) It helps in improving women’s economic independence and their social status.
(ii) Women education has a favourable impact on fertility rate and women and child health care.
(iii) Educated woman can provide better guidance to her children.