HUMAN CAPITAL FORMATON IN INDIA

Q) Bring out the difference between literacy and education

• Education is a much wider concept than literacy. Literacy refers to the ability to read
and write. Education includes three parameters, viz. primary education, secondary
education and higher education.

Q) Why was educational cess imposed by the government on all union taxes?
• The Government of India levied a 2% education cess on the union taxes so that the
revenue generated by the government from this provision can spend on financing
elementary education.
•
Q) Literacy rates in India have increased bus so has the absolute number of.
• Literacy rates in India have increased mainly because of the growth in the
educational facilities. However, with tremendous increase in the populations, the
absolute numbers of illiterates have also increased.

Q) Why has India not been able to achieve 100% literacy rates?
• India has not been able to achieve 100% literacy because the government’s
expenditure on education was inadequate.

Q) What is the difference between physical capital and human capital?

• Physical Capital
1. It increases physical goods.
2. It is an economic and technical process
3. Physical capital is tangible.
4. It can be sold in the market.
5. The physical capital is separable from its owner.
6. Physical capital formation can be built even though imports.

Human capital
1. It increases knowledge and efficiency.
2. It is partly a social process.
3. Human capital is intangible.
4. It can't be sold in the market.
5. Human capital is not separable from its owner.
6. Human capital formation is to be done through
Conscious policy formulations

Q) What factors contribute to human capital formation?

• The factors contribute to human capital formation are as follows:
1. Expenditure on education
2. On-the-job training
3. Migration
4. Expenditure on health
5. Expenditure on information

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Q) What are the two major sources of human capital? In a country?
• Human capital refers to the stock of skill and expertise of a nation at a point of time.
The two major sources of human capital in a country are:
1. Education, 2.Health
Education and health are considered as an important input for the development of a nation
A better educated person has greater skills and knowledge and therefore greater
opportunity to work and earn higher income. Similarly, a healthy person is an asset for the
nation as he is more productive than a sick person, who is unable to work efficiently due to
bad health. Hence, expenditure on education and health is an important source of human
capital formation

Q) Describe any three cause of poor health in India.

• Following are three causes of poor health in India:
1. High Birth Rate and Rapid Growth of Population:
It has created a number of health risks. Population growth has made it difficult to provide
safe or sufficient water supply, garbage disposal and sanitation for the community.
2. Malnutrition: Widespread malnutrition has contributed to the number of health
problems including infections and diseases among children.
3. Unsanitary Conditions and Housing: A large number of people live in poor
households located in crowded and unsanitary surroundings. People face the
problem of contaminated food, water and soil, insufficient personal hygiene and
sewage disposal. A sizeable population lives in sub standards dwellings lacking in
space, ventilation and sunlight.

Q) Give the names of health care institutions in rural

• Health care institutions in rural areas are as follows:
1. Primary health centers.
2. Sub-centres to provide family planning services.
3. Community health centres.
4. Multipurpose worker's scheme.
5. Village health guides.
6. National Rural Health Mission (NRHM)

Q) How is the government expenditure on education expressed? Which in your

opinion is a better measure?
• Government expenditure on education can be expressed in two ways:
1. As a percentage of total government expenditure,
2. As a percentage of Gross Domestic Product (GDP).
The measure as a percentage of GDP is a better measure since, it sets fixed targets rather
than variable government expenditure.

Q) How does both education and health lead the nation towards higher economic
growth?
1. Educated person can contribute to economic growth more than that of uneducated
person, Infact skills of an educated person are more. Education changes the outlook
of a person. Educated labor force adopts new technologies easily. It increases the
production; as a result, higher rate of economic growth is achieved.

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 2. Investment in health keeps laborers healthy and enables them to work for a long
period. A sick person always abstains from work and therefore, is there is loss of
productivity. But healthy person contributes in production resulting higher rate of
economic growth.
In this way, both education and health increases the income capacity of a person. It creates
human capital formation which further leads to higher economic growth rate.
Q) A skilled worker like software professional generates more income than an
unskilled worker. Why?
1. A skilled worker generates more income than an unskilled worker mainly because
the productivity of an educated and skilled person is higher than an unskilled one. A
skilled worker also commands a higher earnings or gainful employment. This is
because they cannot be substituted with another since; it takes years to generate a
manpower which is skilled in a particular field. On the other hand, an unskilled
worker like a rickshaw puller can be easily substituted and such workers easily
compromise on lesser earnings.

Q) 'Indian education system is considered faulty from the employment angle'.

Do you agree Explain?
• Yes, I agree with this statement. Indian education system is largely irrelevant to the
Indian economy. There is no linkage between education and employment
opportunities. After completing their school and college education, for a number
Of years, men and women remain unemployed because they do not have practical
training and useful skills. Most of the students do not gain any occupational and
vocational training. Hence, the Indian education system is considered faulty from the
employment angle.

Q) There is a downward trend in inequality worldwide with a rise in the average

education levels. Comment.
1. There is a negative relationship between education level and degree of inequality.
This relationship has been practically established across the world in recent
decades.
2. Education not only imparts technical skills but also at the same time enhances
productivity of a person. An educated person, endowed with higher productivity and
efficiency enjoys relatively higher income earning capacity. The higher income
earning capacity and greater acceptability of modern techniques raise the standard
and quality of living
3. Distribution of income has become less skewed and gap between the rich and the
poor has been narrowing slowly. Gradually, the importance of education is being
realized worldwide and consequently, governments of different countries have been
investing heavily in the education sector. With the rise in average education levels,
not only inequality but also other problems like, poverty, under-utilization of
resources and inferior standards and quality of life have been minimized.

Q) How is human development a broader term as compared to human capital?

1. Human development is a broader term as compared to human capital because human
capital is a means to an end whereas human development is an end in itself Human
capital considers education and health as a means to make human being a good
productive person. Human capital is a means to an end where means implies skills that
are used in the process of production and end denotes the consequent increase in the
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 productivity. The higher level of output can be achieved through extensive application of
human capital.
2. On the other hand, human development is an end in itself which refers to the holistic
development of the individuals. The development can be possible only by acquiring good
education and attaining good health. Therefore, education and health are the two main
features of human development.
Human development occurs when majority of the people in the economy are
educated and healthy. Thus, the end signifies the development of an individual via
education and health. Therefore, we can conclude that human development is a broader
term as compared to human capital

Q) What are the main problems of human capital formation in India?

The main problems are as under:
1. Education, 2.Health
Problems of Educational System:
1. Unbalanced development
2. Wastage of resources.
3. Examination system
4. Expensive higher education system.
5. Lack of funds.
Uneven per capita expenditure Problems of Health:
1. Uneven distribution of medical facilities.
2. Mismatch between infrastructure and trained personnel.
3. Lack of appropriate referral system.
4. Poor sanitary conditions.

Q) What is the impact of health and medical facilities in India?

1. Birth rate fell down from 40 per thousand in 1951 to 20.4 per thousand in 2016.
2. Death rate fell from 27 per thousand in 1951 to 6.4 per thousand in 2016.
3. Infant mortality rate reduced from 146 in 1951 to 34 in 2016.
4. Life expectancy increased from 32 years in 1951 to 68.56 years in 2016.

Q) Mention the government organizations that regulate the health and education
sectors
• The Indian government regulates Education
And Health sectors through the following organizations:
1. NCERT (National Council of Education Research and Training): The organization is
responsible for designing the textbook up to 12th standard. 1
2. UGC (University Grants Commission): This organization is the prime funding
authority for university education. It also enforces rules and regulations regarding
higher education.
3. AICTE (All India Council for Technical Education): It enforces rules and regulations
regarding technical engineering-education in the country
4. ICMR (Indian Council for Medical Research): This organization formulates the rules
and regulations relating to education and research in health sector.

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Q)'Education plays a significant role in economic development'. Discuss.
• Following points show that education plays significant role in economic development:
1. Education increases the receptivity of people to modern and scientific ideas. Thus,
education increases the efficiency of people.
2. It results in greater awareness of available opportunities and mobility of labour.
3. It imparts to people knowledge, skills and attitude which would enable them to
contribute to the productive programmers.
4. It produces the skilled and trained personnel needed by the economy. Education
prepares Individuals as human resources.

Q) India is going to be a knowledge based economy In the near future'. Discuss. India
is soon emerging as a knowledge bank. World Bank in its recent report states that
India should make a transition to be knowledge economy and if it uses its knowledge
as much as Ireland does, then the per capita income of India
Will increase from a little over US$ 1000 in 2002 to US $ 3000 in 2020
• The Indian software industry has been showing impressive record over the past
decade. The use of e-mail, e-governance and development of information
technology shows that India is slowly transforming itself into a knowledge based
economy.

Q) What factors contribute capital formation?

• Factors that contribute to human capital formation are as follows:
(i) Education: Education not only raises the standard and quality of living but also
encourages modern attitudes of people. Moreover, education increases the productive
capacity and productivity of a nation's workforce by honing their skills.
(ii) Health: There is a saying "The greatest wealth is health." The wealth of the country can
be increased
With the efforts of healthy workforce Investment in health sector increases, efficiency and
productivity of a nation's workforce. In contrast to
An unhealthy person, a healthy person can work better with more efficiency and
consequently, can contribute relatively more to the GDP of a country
(iii) On-the-job training: Training refers to the act
of acquiring skills, knowledge and competency required to perform a particular job
efficiently and effectively. On-the-job training is the most effective kind of training to a
trainee, imparting him with the technical skills and know-how at the actual work site. In this
type of training, a trainee is assisted and trained by a trainer when the trainee actually doing
the job.
(iv)Migration: Migration refers to the movement of people from underdeveloped or
developing countries to developed countries in search of better avenues. Migrations
contribute to human capital formation as it facilitates the utilization of inactive or
underdeveloped skills of an individual.

Q) Trace the relationship between human capital and economic growth.

• Human capital is believed to be positively related to economic though; it is difficult to
establish a relation of cause and effect from the growth of human capital to economic
growth, but we can see that human capital formation is related to economic growth in
the following manner:

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(i)Increase in labor productivity: Investment in human capital through expenditure on
education, health, ect. Enhances the productivity of labour as they become physically fit
and skilled in their jobs it leads to efficient utilization of the material input and capital.
(ii) Innovations: Research and development is necessary for innovations in an economy
which lead to advancement in technology which lead to advancement in technology and
creation of new products. Human capital formation helps in preparing learned scientists and
researchers in various subjects who bring out innovative products, technologies and
processes and thus, add to the economic growth.
(iii) Absorptive capacity: Advanced technology can be adopted only if the skill and
knowledge required for using that technology is present in the country. Investment in
education and on the job training help to create these skill and knowledge base and thus,
helps in absorption of new technologies which lead to higher production and thus, economic
growth.
(iv) Participation Rate: Human capital formation makes a greater proportion of population
capable of participating in the economic, social and political activities of a nation. Thus
raising the participation of people in the process of economic growth

Q) Establish the need for acquiring information relating to health and education
expenditure for the effective utilization of human resources.
1. The degree of availability of jobs, salaries and admission related information plays
an important role in the determination plays an important role in the determination of
human capital. The availability of jobs and admissions related information not only
help the students to opt for the best choice according to their interest areas but also
leads to an according to their interest areas but also leads to an effective utilization
of human skills and knowledge.
2. Expenditures on education enhance human skills and their utilizations. On the other
hand, the expenditure on health improves health, efficiency, quality of living and life
expectancy of people.
3. People are reluctant to opt for various health measures due to the lack of complete
knowledge and information. For example knowledge people knew very little about
polio and about its vaccination. But due to the constant efforts
By various government and non-government organizations under the pulse polio
immunization programme, people are now well aware of polio. Therefore, it is due to the
continuous publicity and various awareness campaigns, this programme has gained public
consciousness.

Q) Explain how investment in education stimulates economic growth.

• Education stimulates economic growth as it:
1. Eradicates skewed income distribution: Education not only increase the income
earning capacity but also reduces the skewed distribution of income, thereby, forms
an egalitarian society.
2. Raises standard of living: Education enhances the income earning capacity of
people, thereby; it raises the standard of living and also improves the quality of living.
3. One solution for other economic problems:
The importance of education is not only limited to make people educated but also to
facilitate an undeveloped economy to solve different but interrelated macro economic
problems like poverty, income inequality, population, investments, under- utilization of
resources.

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 4. Increases the participation rate: It fosters economic development by increasing the
participation of people in the process of growth and development.
5. Acceptability of modernization: An educated public of a nation has greater
acceptability of modernization and modern techniques. This not only helps the
economy to break the shackles of tradition and backwardness.
6. Develops mental abilities: Education develops the mental abilities of people and
helps them to make their choice rationally and intellectually. Education churns out
goods citizens by inculcating values in them.

Q) Discuss the need for promoting women’s education in India.

• Women have always been neglected when it comes to educations in India. The
access to education has always been biased towards male population due to our
social system which is patriarchal. The lack of education has caused exploitation of
women and has resulted in a lower social status of women in India. There is an
imminent need for promoting female educations in India, Because of the following
reasons:
1. Women education is essential for providing them economic independence and
empowering them independence and empowering them to save them from
exploitation and domestic violence.
2. Women education is essential in order to raise the social status of women so that the
quality of life of women can be improved.
3. Educating woman helps in promoting family welfare programmes and thus, in
population control.
4. Educated women are aware of the importance of health care and thus, take proper
care of their family members contributing in human capital formation.
5. Educated woman means educating a family. An educated woman can inculcate
moral values in her children and can facilitate their education.

Q) In your view, is it essential for the government to regulate the fees structure in
education and health care institutions? If so, why?
1. Education and health sectors are the tow key sectors responsible for the formations
of good quality human capital. The developments of these two sectors are
emphasized by almost all the less developed countries.
2. India, Expenditure on both education and health sectors are carried out by all the
three tiers of the government and also by private institutions. While, private
institutions are public institutions are guided by the main motive of rendering services
and to enhance human capital.
3. As the Cost of Education and health facilities provided by the private institutions is
highes, so it is difficult for the majority of the population to avail these services
because of their economic inability. Thus, it is very important for the government to
provide quality education and health facilities to this section of the population.
4. As the Indian constitution counts right to free education and medical facilities as the
fundamental right of citizen, so it is the responsibility of the government to provide
education and health services to all.
5. There are some underprivileged section of population like ST, SC,OBC, the interests
of whose can only be protected by the interference of the government.
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 6. The people as individual consumers do not have complete information about the
quality of services and the related costs. This often leads to the exploitation of
people. Hence, the government intervention in health and education sector to
regulate in health and education sector to regulate the fees structure is must in order
to enhance the quality of human capital

Q) Explain the meaning of human capital formation with the help of an example.

• Human capital formation is a process which converts human resources into human
capital. It is the process of acquiring and increasing the number of people who have
the skills, education and experience which is necessary for the economic
development of the country.
For example, if in the year 2014, the number of doctors and engineers in our country
were 4, 50,000 and in the year 2015, their number grew to 5, 00,000, then it the
extent of 50,000 doctors and engineers.

Q) Explain how health and expenditure on information are a source of human capital
formation.

• Health as a source of human capital formation

Health is an important source of human capital formation because only a healthy
worker can contribute towards increasing the capital stock of the country. A sick
worker, without access to medical facilities is compelled to abstain from work, and
there is loss of productivity.
Expenditure on information as a source of human capital formation people
spend to acquire information relating to the labour market, education and health
institutions, etc. Information relating to job opportunities and educational institutes
enables people to increase their earning potential. Therefore, it is also a determinant
of human capital formation.

Q) Why and how do firms give on the job training to their workers?
• Firms give on the job training to their workers to enhance their productive skills so as
enable them to absorb new technologies and modern ideas.
It absorbs new technologies and madern ideas.
It can be given in two forms:
1. Training given within the office premises.
2. Training gives outside the office premises.

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Q) A Skilled worker like software professional generates more income than an
unskilled worker. Why?

• A skilled worker generates more income than an unskilled worker mainly because
the productivity of an educated and skilled person is higher than an unskilled one. A
skilled worker also commands higher earnings and gainful employment. This is
because they cannot be substituted easily because, it takes years to generate a
manpower which is skilled in a particular field on the other hand an unskilled worker
like a rickshaw puller can be easily substituted and such workers easily compromise
on lesser earnings.

Q) Human resource is the main economic factor’. Discuss.

• Of all the factors of production, via land, labour, capital and organization: labour or
human resource is the most important economic factor because it is the only factor
which is active. All the other factor factors are inactive. In the absence of human
resource, production, it is correctly said that human resource is the main economic
factor.

Q) India is going to be a knowledge based economy in the near future’. Discuss.

• India is soon emerging as a knowledge bank. The India software industry has been
showing an impressive growth over the past decade. The use of e-mail, e-----
governance and development of information technology shows that India is slowly
transforming is self into a Knowledge based economy.

Q) Explain the role of education in human capital formation.

• Education is very essential for human capital formation. It is the most effective way
of enhancing and enlarging the productive workforce of the country. The benefits of
education for exceed the cost of education and the difference between the two is the
value of human capital formation

Q) Keeping in view the present scenario, what should be the objective of education
in the India?
• In view of the present scenario, the following should be the objective of education in
India:
1. The first and foremost objective should be that of ensuring hundred per cent
literacy in the country, as even after nearly 70 year of independence, around
26% of the population is illiterate.
2. Vocationalisation of education should be encouraged.
3. Higher education should be brought within the reach of all.
4. Adult and female education should be encouraged.

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Q) Write a brief note on National Literacy Mission.

• In 1988, National Literacy Mission (NLM) was initiated to promote adult education. A
women education council was also established to promote women education in our
country. The NLM has been recast as 'Saakshar Bharat' with a central focus on
female education. The programme covers all citizens in the age group of 15 years
and above.

Q). Do you think the current level of education expenditure is inadequate? Why?
• Yes, the current level of education expenditure is inadequate. It is only 3.25% in
comparison to the desired level of 6% of GDP. More than 50 years ago, the
education commission has recommended that atleast 6% of GDP should be spent
on education, so as to make a noticeable rate of growth in educational
Achievements. However, the investment in education expenditure
Has not been uniform and is marked with regional and gender inequalities. India has
also not been able to achieve the objective of providing free and compulsory
education to all children in the age group of 6 to 14 years.

Q). Examine the role of education in the economic development of a nation.

Or
'Education plays a significant role in economic development'
. Discuss.
• Following points show that education plays a significant role in economic
development:
1. Education increases the receptivity of people to modern and scientific ideas.
Thus, education increases the efficiency of people.
2. It results in greater awareness of available opportunities and mobility labour.
3. It imparts to people knowledge, skills and attitude which would enable them to
contribute to the productive programmers.
4. It produces skilled and trained personnel needed by the economy. Education
prepares individuals as human resources.

Q ) the Education Commission in 1966, had recommended that at least 6% o GDP

should be spent on education in India. However, even after 50 years of such
recommendation, the government continues to spend 3-4% of GDP on
education.
How has this affected the education sector in India? What value stands
violated by the Central Government?
• Government's unwillingness to spend 6% of GDP on education has affected thi
sector adversely, as is enumerated with the help of given statistics.
(i) In India, about 30.3 crore people are still illiterate.

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 (ii) The female literacy rate is 65.46%, which is quite low as compared to male
literacy rate of 82.14 per cent.
(iii) There is disparity in education levels of urban and rural areas. The value which
stands violated by the Central Government is complete disregard towards expert
opinion.

Q). With a view to discourage hoarding of cash and to solve the problem of black
money, the Government of India initiated demonetisation of Indian economy
declaring that 500 and 1,000 notes are no longer legal tender. This situation
created a cash crunch and parents were not able to pay school fees of their
children. Suggest some measures that the schools could adopt, so that this
problem is solved and the education of the children is not hindered.
• Some of the measures that the schools could adopt, in view of the demonetisatio
drive are as follows:
1. The schools could accept fees by online transfer.
2. The schools could accept digital cash.
3. They could accept fees by a cheque or a bank-draft.
4. They could also give extension for payment of fees for those parents who do not
have access to either of these means.

Q). “School dropouts are giving way to child labour” Discuss how this a loss to
human capital.

• Primary education causes an increase of 40% in labour productivity, secondary

education 10% and higher education 300%. This observation quite rightly highlights
the importance of education in labour productivity. As children drop out from the
school, they are forced to take up small and menial jobs and work as labourers at
contruction sites, factories, etc. This is definitely a loss to human capital. If these
children were allowed to complete their education, it is possible that some of them
would have become doctors or engineers or government officials. Their productivity
would have been more and they would have contributed towards human capital
formation. So, school dropouts are definitely a loss to human capital

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