HSSLIVE Plus One Economics Chapter 5: Human Capital Formation in India Notes

Human capital formation refers to the development of skills and knowledge in the population that enhances productivity and economic growth. In India, this has been pursued through expanding educational infrastructure, improving healthcare services, and providing technical training programs. Despite significant progress in school enrollment and literacy rates, challenges persist in the form of quality disparities, high dropout rates, inadequate vocational training, and insufficient public expenditure on education and health. The demographic dividend presents a unique opportunity for India, but realizing its potential requires substantial investments in human capital to transform the large young population into a productive workforce.

Chapter 5: Human Capital Formation in India

Human capital refers to the stock of knowledge, skills, expertise, and health that individuals possess, which contributes to their productivity and earning capacity. Human capital formation is the process of adding to this stock through investments in education, healthcare, training, and skill development.

Concept of Human Capital:

• Human beings as assets rather than liabilities
• Distinction between physical capital and human capital
• Human capital as both a means and an end of development
• Role of human capital in economic growth and social development

Sources of Human Capital Formation:

1. Education:
   • Formal schooling (primary, secondary, higher education)
   • Vocational and technical training
   • On-the-job training and apprenticeships
   • Adult education and lifelong learning
2. Health:
   • Preventive healthcare
   • Curative healthcare
   • Nutrition and sanitation
   • Physical and mental well-being
3. Migration and Training:
   • Rural to urban migration
   • International migration
   • Skills acquired through migration
   • Remittances and knowledge transfer

Role of Human Capital in Economic Development:

• Enhances labor productivity and efficiency
• Promotes technological innovation and adaptation
• Facilitates entrepreneurship and risk-taking
• Improves resilience against economic shocks
• Contributes to social mobility and reduces inequality
• Enables demographic dividend realization

Evolution of Human Capital Formation in India:

• Neglect during colonial period
• Recognition in post-independence planning
• Kothari Commission (1966) on education
• National Policy on Education (1986)
• Economic reforms and human capital (post-1991)
• Recent initiatives: National Education Policy 2020, Skill India, Digital India

State of Human Capital in India:

1. Education:
   • Improvements in literacy rates (74.04% as per 2011 Census)
   • Universal enrollment at primary level
   • Persistent issues in quality and learning outcomes
   • High dropout rates at secondary level
   • Gender and regional disparities
   • Challenge of relevant skill development
2. Health:
   • Improvements in life expectancy (69.4 years in 2021)
   • Reduction in infant mortality rate
   • Challenges in malnutrition and preventable diseases
   • Low public health expenditure (around 1.5% of GDP)
   • Inadequate healthcare infrastructure
   • Regional disparities in health outcomes

Government Initiatives for Human Capital Formation:

1. Education Sector:
   • Sarva Shiksha Abhiyan (SSA)
   • Mid-Day Meal Scheme
   • Rashtriya Madhyamik Shiksha Abhiyan (RMSA)
   • Right to Education Act, 2009
   • Skill India Mission
   • National Education Policy 2020
2. Health Sector:
   • National Health Mission
   • Ayushman Bharat
   • Poshan Abhiyan (National Nutrition Mission)
   • Janani Suraksha Yojana
   • Mission Indradhanush (vaccination)
3. Skill Development:
   • Pradhan Mantri Kaushal Vikas Yojana
   • National Skill Development Mission
   • Industrial Training Institutes (ITIs)
   • Sector Skill Councils

Challenges in Human Capital Formation:

• Inadequate public expenditure on education and health
• Poor quality of education and healthcare services
• Mismatch between education/skills and labor market requirements
• Digital divide and technological inequalities
• Brain drain of skilled professionals
• Demographic challenges: aging population in some states, youth bulge in others
• COVID-19 pandemic setbacks to education and healthcare

Way Forward:

• Increasing public investment in education and health
• Improving quality and relevance of education
• Strengthening vocational education and skill development
• Promoting industry-academia linkages
• Leveraging technology for inclusive education and healthcare
• Focus on early childhood education and development
• Addressing regional and social disparities

Human capital formation is central to India’s aspiration of becoming a knowledge economy and achieving sustainable development. The focus needs to shift from mere enrollment and access to quality, relevance, and equity in education and healthcare services.

Complete Chapter-wise Hsslive Plus One Economics Notes

Our HSSLive Plus One Economics Notes cover all chapters with key focus areas to help you organize your study effectively:

Economics: Indian Economic Development

• Chapter 1 Indian Economy on the Eve of Independence
• Chapter 2 Indian Economy 1950-1990
• Chapter 3 Liberalisation, Privatisation and Globalisation -An Appraisal
• Chapter 4 Poverty
• Chapter 5 Human Capital Formation in India
• Chapter 6 Rural Development
• Chapter 7 Employment-Growth, Informalisation and Related Issues
• Chapter 8 Infrastructure
• Chapter 9 Environment Sustainable Development
• Chapter 10 Comparative Development Experience of India with its Neighbours

Economics: Statistics for Economics

• Chapter 11 Introduction
• Chapter 12 Collection of Data
• Chapter 13 Organisation of Data
• Chapter 14 Presentation of Data
• Chapter 15 Measures of Central Tendency
• Chapter 16 Measures of Dispersion
• Chapter 17 Correlation
• Chapter 18 Index Numbers
• Chapter 19 Uses of Statistical Methods