Chapter 4: Human Capital Formation in India

Human capital and economic growth are interrelated to each other, as capital formation helps in speeding up economic growth and facilitates the formation of human capital. The relation between economic growth and human capital formation is given below:

1. A skilled worker will enhance productivity which will result in better production and numbers. The immediate impact of high-quality goods is revenue generation which helps in the growth of an economy.

2. An educated and skilled worker may come up with innovative solutions which will result in a reduction of cost and process optimisation. It will result in economic growth.

3. People with higher technical skills are able to motivate more to follow the same path, and this brings involvement which will help in the economic growth and development of the nation.

Access to better education is essential for reducing the inequalities of income. Having an education makes a person possess more skills and abilities, which raises income and improves the living standard and quality. Income distribution has become less pronounced. The importance of education is being understood; therefore, governments of different countries have started investing in education in order to elevate the status of its peoples. Rising education levels has led to a reduction in inequality.

Education plays the following role in the development of a nation:

1. Education helps people in developing skills which help enhance productivity and lead to an increase in earning capacities.

2. Education helps in the development of the mental ability of people, which will help in making rational choices. Good values are imbibed with education.

3. An educated person will accept modernisation and modern techniques which are beneficial for the economy.

4. It increases income earning capacity and reduces the skewed distribution of income in society.

5. It increases the participation of people and helps in the growth of the economy and the development of people as a whole.

6. Education not only helps with studies, but it helps develop an economy and solve other interrelated issues, such as population, poverty and resource underutilisation.

Investment in education helps stimulate economic growth in the following ways:

1. Education helps people in developing skills which help enhance productivity and lead to an increase in earning capacities.

2. Education helps in the development of the mental ability of people, which will help in making rational choices. Good values are imbibed with education.

3. An educated person will accept modernisation and modern techniques which are beneficial for the economy.

4. It increases income earning capacity and reduces the skewed distribution of income in society.

5. It increases the participation of people and helps in the growth of the economy and the development of people as a whole.

6. Education not only helps with studies, but it helps develop an economy and resolve other interrelated issues, such as population, poverty and resource underutilisation.

7. It raises the standard of living of people.

On-the-job training is one of the most effective training that can be given to a trainee that enables them to learn technical skills. The need for on-the-job training is to:

1. Boost the morale of employees and improve their efficiency of workers

2. It helps a person/trainee to know the values, culture, standards and norms of the organisation

3. Raw materials are utilised in a better way

Human capital can be linked to economic growth in the following ways:

1. A skilled worker will enhance the process, which will result in better production and numbers. The immediate impact of high-quality goods is revenue generation which helps in the growth of an economy.

2. An educated and skilled worker may come up with innovative solutions which will result in the reduction of cost and process optimisation. It will result in economic growth.

3. People with higher technical skills are able to motivate more to follow the same path, and this brings involvement which will help in the economic growth and development of the nation.

Indian society has always been skewed towards the female population in regard to education, and this has resulted in a low literacy rate among women. It has impacted the economy as a whole, as women, who are part of the economy, are unable to contribute significantly due to being treated as unequal. A nation can prosper with equal rights for both men and women. To achieve economic growth, the role of women is very important. Therefore, female education is necessary for the growth of society. The following points will help in promoting the same:

1. To improve economic stability, women should be educated.

2. Educating women is important, as it will help in raising the status of women in society and help in the growth of society.

3. A learned woman will inculcate the same values in the future generation.

4. An educated woman will be more conscious about health conditions which will result in better fertility rates.

Government intervention in the education and health sectors is needed for the following reasons:

1. As both public and private firms are operating in both health and education, there is a need for one regulatory body which should monitor their functions.

2. Cost of services provided by private firms is more which is not affordable by the weaker sections of society.

3. Private institutions at times cannot operate in remote areas, but the government can; hence, it will benefit those staying in remote places.

4. Government interference is required for underprivileged sections of society, such as SC and ST so that they get quality education and health facilities.

5. For the effective development of human capital, critical sectors like education and health should be taken care of by the government.

6. Education and health sectors have long gestation periods, and for such sectors, funding and intervention of government are required in order to make facilities available for the masses.

Problems associated with the human capital formation in India are

1. The ever-increasing population is exerting pressure on the limited resources that is available, which in turn is impacting the quality of life and reducing the capacity to acquire new skills and knowledge.

2. Migration plays a serious threat to the formation of human capital as the skilled and knowledgeable population shifts to areas which offer good sources of income. But, doing this creates a loss of human capital in developing countries.

3. Lack of workforce planning has resulted in the underutilisation of skills, and there has been no effort to address this issue, which has resulted in unemployment and underemployment.

4. Many institutions are offering an inferior quality education which is causing unequal distribution of knowledge and a lack of required skills. It is one of the significant bottlenecks in forming quality human capital.

Government intervention in education and health sectors is needed to regulate fee structure for the following reasons:

1. As both public and private firms are operating in both health and education, there is a need for one regulatory body which should monitor their functions.

2. Cost of services provided by private firms is more which is not affordable by the weaker sections of society.

3. Government interference is required for underprivileged sections of society, such as SC and ST, so that they get quality education and health facilities on par with the privileged.

4. For the effective development of human capital, critical sectors like education and health should be taken care of by the government.

5. Education and health sectors have long gestation periods, and for such sectors, funding and intervention of the government are required in order to make facilities available for the masses.

• Meaning of human capital
• Sources of human capital
• Human capital and human development
• Human capital formation in India: Great Prospects
• Education sector in India
• Future prospects
• Conclusion