Human Capital Formation | Sources | Role | Problems Faced | Chapter 8 |
Human Capital Formation- Meaning and Concept
Human Capital refers to the stock of skill and expertise in a country at a point of time.
Human Capital Formation refers to the process of increasing the stock of capital of human over a period of time.
Sources of Human Capital Formation
- Expenditure on Health: By expending more on health sector, the people become more efficient and productive which increases the production level therefore the GDP increases.
- Expenditure on Education: By expending more on education sector, the productive workforce becomes more effective and provides a quality life due to which many people spend a heavy amount on education.
- On-the-job Trainings: Expenditure done on training by the firms enables the workers to raise the level of productivity which indirectly increases the GDP level of a country.
- Migration: The people should move or migrate to some other place in order to get their inactive skills utilized.
- Expenditure on Information: Information should be shared with the labour related to the labour market and skills offering institutes so that they can get better job and can utilise their knowledge and skills.
Role of Human Capital Formation in Economic Growth
- Increase in Participation: By increase in the human capital formation, the level of participation also increases as everyone wants to get job as per his satisfaction which also increases the equality among the people.
- Increase in Skills: With the human capital formation, the skills of an individual also increases whereby he can participate more in the production activities and other related activities.
- Increase in Productivity of Physical Capital: With the increase in productivity, a worker can handle big machines himself by which the productivity level of physical capital increases.
- Increase in Life Expectancy: The life expectancy of a worker also increases for now he gets more healthcare and education facilities.
You May Also Read Indian Economy on the Eve of Independence | Economic Planning | Five Year Plans | Goals | Achievements | Agriculture Sector | Features | Problems | Green Revolution | Strategy of Industrial Growth | IPR-1956 |Features | Impacts | India’s Foreign Trade | Inward Looking Trade Strategy | Economic Reforms Since 1991 | Poverty | Poverty Line | Causes | Poverty Alleviation Program | Rural Development |Objectives | Challenges |Types | Unemployment | Level of Unemployment | Consequences | Environment | Sustainable Development | Features | India | China | Pakistan | Comparative Study | for better understanding of the chapters and scoring higher in upcoming exams.
Problems Faced by Human Capital Formation in India
- Increase in Population: With the Increase in the population, the facilities per head decrease due to which an individual gets lower amount of activities as compare to the needed which results in fall in the quality of life.
- Greater Regional and Gender Inequality: With the grater inequality and regional inequality, some people are not supposed to work in certain industries even when they can also do the work with the same efficiency.
- Brain-drain: People with high caliber such as scientists, engineers etc. are migrating to other countries due to which the human capital formation process slows down in the country.
- Greater Poverty Level: The poverty level in the country is very high due to which people are not able to fulfill basic requirement of their life.
Education – Essential Element of Human Development
Education refers to the process of teaching, training especially in schools and colleges to get the knowledge whereby ene can improve one’s skills and bring social changes around.
Importance and Objectives of Education
- It produces good person.
- It facilitates use of resources.
- Develops of science and technology
- Develops personality of an individual.
- Promotes cultural standards.
- Increases mental horizon of people.
Government Intervention in Education and Health
The education and health sector needs high investment along with fixed expenditure. It is difficult for private sector to invest such a huge amount unless they are allowed to recover the amount from the person. Therefore, the government intervenes so that every person of our country can get better education and health facility for they are counted in necessities to live life.
Sectors of Education in India
- Elementary Education: It covers the student from class 1 to 8 in the age group of 6 to 14. Around 97% of students are receiving education in the form of elementary education.
- Secondary and Senior Education: Navodaya schools and Kendriya Vidyalayas are playing important role in promoting education at center level and India have around more than 442 lakh students in this age-group.
- Higher Education: In India, around 665 universities are imparting education under which 35829 colleges are providing general education. Besides, they have around 130 lakh students in their campuses.
Finance of Education
- Central Government: Around 3% of total annual budget is spent by central government on education.
- State Government: Around 10-30% of total annual budget is spent by state government on education.
- Parent for their Children: Around 4-5% is spent by parents on education.
- Endowments: An approx. of 35 is spent by endowments on education.
- Private Trusts: Private trust is spending 7% of total expenditure on education.
Problems Faced by Education in India
- Large Number of Illiterates: India has a greater number of illiterates owing to which only a few have a good knowledge about importance of education. Therefore, they send their children to schools for studies.
- Gender Inequality: The rate of gender inequality in India is very high, due to which in some areas of country female child is not allowed to go to school.
- Privatisation: With privatisation in education sector, the expenditure of family increases on education due to which many of poor people are not able to incur the expense of schools for their children.
- Inadequate Vocationalisation: The education in India is mostly related to degrees due to which students are neither able to monetize their skills nor able to use those skills practically and efficiently.
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