Human capital- it can be defined as the body of knowledge possessed by the population and the

capacity of the population to use the knowledge effectively

Physical capital- it can be defined as all inputs which are required for further production such as
machine, tool and implements, raw materials. stock of physical capital measures the production capacity
of a nation

Financial capital - paper claim against physical capital is termed as financial capital

Human capital formation- the stock of human capital can be profoundly increased by investing in such
activities as education and health. any addition to the stock of human capital is called human capital
formation. following are the sources of human capital formation

1 expenditure on education- it is the most effective way of enhancing and enlarging a productive
workforce in the country. People invests(spends) hugely on education as returns are substantially large.
Education enables an individual to make a good living throughout one’s life.

2. expenditure on health - expenditure on health makes a man more efficient and therefore,
more productive. He adds more to the GDP of a nation than a sick person. It brings out the best of skills
level in human beings.

3 on the job training - training enables people to raise the level of their efficiency and thus
their productivity. Firms invest on on-the-job training as returns far exceeds the input cost.

4. migration migration contributes to human capital formation as it facilitates utilisation of

otherwise inactive skills of the people, or it facilitates fuller / better utilisation of the skills. people
migrates because gains of migration are much greater than the cost of migration

5 study programs for adults other than formal education, the government and NGOs organise study
programs for adults to make them proficient in their work areas which enhances their productivity

6 expenditure on information - information relating to job market and educational institutions

offering specialised skill is an important determinant of a scale. Information enables people to actualize
their productive potential.

Role of human capital formation in economic development

1 change in emotional and material environment of growth- emotional environment becomes

conducive to growth as people tend to acquire growth oriented attitude and aspirations. material
environment becomes helpful to growth as the society now possesses higher number of skilled and
trained workers to implement the plans and programs of economic growth.

2. higher productivity of physical capital- human capital formation increases productivity of

physical capital. specialised engineers and skilled workers can certainly handle machines better than the
others. it enhances productivity and accelerates the pace of growth

3 innovative skills human capital formation facilitates innovations- the undercurrent(major

reason) of growth and development. innovation is the lifeline of growth. more in innovation skills, more
the possibilities of innovations
 4 higher rate of participation and equality- by enhancing productive capacity of the labour
force, human capital formation induces greater employment which increases the rate of participation of
labour force. higher the rate of participation, greater will be the degree of economic and social equality
in the country.

5. Improvement in demographic indicators various demographic indicators such as life

expectancy, IMR, MMR, death rate, birth rate, etc shows improvement when the quality of human
capital is more efficient

6. higher rate of participation human capital formation increases the rate of participation of
labour force in the process of production by enhancing their productive capacities. higher rate of
participation leads to economic and social equality in the society thereby leading to economic
development

Problem facing human capital formation in India

there are certain serious problems in the process of human capital formation. these are as follows

1 rising population rising population reduces per head availability of the existing facilities.
Accordingly, capacities to acquire knowledge and specialised skills are reduced. these facilities relates to
housing, sanitation, drainage, water system, hospitals, education, etc. Stress on these facilities affects
the quality of life and lowers the capacity to acquire specialised skills and knowledge.

2 Brain drain- brain drain refers to the Migration of those person who are born, educated
and trained in India but migrates to developed countries for better opportunities. This process slows
down the process of HCF in the domestic country

3 deficient manpower planning India is facing one of the most explosive problems of gradual
unemployment because of failure to maintain the balance of ever-growing labour force in the country.
this unemployment leads to wastage of human power and human skills.

4 low academic standards in our enthusiasm to spread higher education we have been opening
many universities, schools, colleges unmindful of their academic standards. Consequently, we have a
large population of half-baked graduates and postgraduates whose deficient skills further leads to
deficiency in the level of productivity. this also lowers our competitiveness in the international market of
human capital.

Education as an essential element of human resource development

education implies the process of teaching, training and learning to improve knowledge and develop skills
compared to other countries of the world.

spread of education in India has not been encouraging, according to 2001 census our literacy rate was
64% of the population (92 95% developed countries)

following are the importance of education

1 it produces a responsible citizen

2 it develops the temper of Science and Technology

3 it facilitates use of natural and human resources

4 it expands mental Horizon of people

5 it helps economic development through greater participation of people

6 it develops human personality

GOVERNMENT needs to spend on education and health sector because this sector needs huge
investment and if this investment is by private sector then they will enter with a profit motive which
would be a burden on poor and they won’t be able to afford it

Growth of education sector in India

1 expansion of general education- there has been a rapid increase in the number of Institutions and
students in India. Institutions has increased the flip by 5 x is number of students has increased and force

2 elementary education - class 12 class 8 in the age group 6 to 14 in 1950 51 their number was 2.23 lakh
in 2011-12 it increased to 11.9 2 lakh as many as 97.4 percent children in the age group of 6 to 11 years
have been receiving education in schools three secondary and Senior Secondary Education in 1950 51
7.4 thousand schools with 150 lakh students in 2011-12 2.12 lakh schools with 482 2 lakh students in
1987 88 Navodaya Vidyalay per established to impart modern education of good standard to talented
students of rural areas for higher education today as many as 665 universities are providing higher
education the number of students in all University is 20000000 University Grant Commission regulate
and Guides higher education V vocational of Secondary Education in February 1988 the central
government launched a plan to vocational I Secondary Education under the plan financial assistance is
given to those School who start vocational course at Higher Secondary plus two level sex rural education
National Rural Higher Education Council has been set up for rural education under this Council 40 rural
education institutions have been functioning

Seven adult and female education in 1988 National literacy Mission was set up to eradicate illiteracy
among the adults Women Education Council has been set up to import female education 8 total literary
campaign it was launched to render everybody literate in the country this program has now Bin recast as
sakshar Bharat with the central focus on female education the program covers all those in the age
groups of 15 and above

Human capital formation it is beneficial for everybody हम लोग सब कुछ-कुछ हिंदी टाइपिंग पता नहीं है
तो डायरे क्ट चलेगा