Quick Revision Notes: Class 11 Economics

Chapter: Human Capital Formation in India

Human Capital: Refers to the stock of skill, ability, expertise, education, and knowledge embodied in the people at a given point of time. It is the ability to produce goods and services.
Human Capital Formation (मानव पूंजी निर्माण): The process of adding to the stock of human capital over time. It transforms human beings into human resources.
Difference between Physical Capital and Human Capital:
- Physical Capital: Tangible (can be touched), easily sold in the market, separable from its owner, depreciates due to wear and tear or obsolescence.
- Human Capital: Intangible (cannot be touched directly), cannot be sold separately from its owner, built over a lifetime, depreciates due to aging (though at a slower rate with continuous learning).

To convert a human being into human capital, investments are made in various sectors. The main sources are:

Expenditure on Education:
- Helps in acquiring knowledge, skill, and better judgment.
- Increases earning capacity and modernizes attitudes.
Expenditure on Health:
- A healthy worker is more efficient and contributes more to production than a sick worker.
- Includes preventive medicine (vaccination), curative medicine (medical treatment), social medicine (sanitation), and provision of clean drinking water.
On-the-Job Training (OJT):
- Training provided to workers either inside the firm or by sending them off-campus.
- Increases labor productivity and helps adapt to new technologies. It can be given in forms like apprenticeship or under the supervision of a senior worker.
Study Programmes for Adults:
- Programs aimed at imparting general literacy and vocational skills to adults who missed formal education.
Migration:
- People migrate from rural to urban areas in search of better jobs (rural-urban migration) or move to foreign countries for higher salaries (brain drain).
- Involves costs of transport and higher cost of living in migrated places, but yields higher future income.
Information:
- Spending to acquire information regarding job markets, educational institutions, and associated costs/salaries. Helps in making effective choices.

Human capital plays a vital role in the economic growth and development of a country:

Increases Productivity: Skills and knowledge make physical capital more productive.
Promotes Innovation and Invention: Educated and skilled workforce can invent new techniques and products.
Changes Outlook: Transforms traditional societies into modern, progressive societies by changing attitudes and beliefs.
Controls Population Growth: Higher education levels lead to greater awareness, lower birth rates, and smaller family norms.
Improves Quality of Life: Higher income and better health standards lead to a higher standard of living.

Human Capital: Treats human beings as a means to an end (increase in productivity and output). Economic growth is the primary focus.
Human Development: Treats human beings as an end in themselves. Education and health are integral because they help individuals lead a long, healthy, and fulfilling life, regardless of their productivity.

Educational Achievements in India:
- Measured by adult literacy rate, primary education completion rate, and youth literacy rate.
- While literacy rates have risen over time, a significant gap remains between male and female literacy.
Growth in Government Expenditure on Education:
- Expended as a percentage of total government expenditure (indicates importance given to education) and as a percentage of Gross Domestic Product (GDP).
- Kothari Commission (1964–66) recommended that at least 6% of GDP should be spent on education to achieve desired results.

Rising Population: Rapidly growing population puts heavy pressure on existing educational, health, and infrastructural facilities.
Brain Drain: Migration of highly skilled and educated personnel (doctors, engineers, scientists) from developing countries like India to developed nations (like USA, UK) leads to a loss of potential human capital.
Insufficient Resources: Actual government spending on education and health has fallen significantly short of the targeted levels (e.g., the 6% GDP target for education).
Gender Inequality: Disparities persist in educational attainment and health status between males and females, particularly in rural areas.
High Regional Disparities: The standard of education and health facilities varies drastically from one state to another (e.g., Kerala vs. Bihar/Uttar Pradesh).
Lack of Vocational Training: The Indian education system has historically been academic and degree-oriented rather than skill-oriented, leading to educated unemployment.

NCERT (National Council of Educational Research and Training): Designs school textbooks and curriculum.
UGC (University Grants Commission): Maintains standards of higher education and disburses grants to universities.
AICTE (All India Council for Technical Education): Regulates technical and management education.
ICMR (Indian Council of Medical Research): Coordinates and promotes medical research in India.

Education Expenditure as % of GDP: $$\left( \frac{\text{Total Government Expenditure on Education}}{\text{Gross Domestic Product (GDP)}} \right) \times 100$$
Target (Kothari Commission): 6% of GDP on Education.
Human Development Index (HDI): Composite index measuring average achievement in three basic dimensions of human development:
1. A long and healthy life (Health)
2. Access to knowledge (Education)
3. A decent standard of living (Income)