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Human Capital Formation in India: NBSE Class 12 Economics

Human Capital Formation in India nbse 12
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Here, you will find summaries, questions, answers, textbook solutions, pdf, extras etc. of (Nagaland Board) NBSE Class 12 (Arts/Commerce) Economics Chapter 6: Human Capital Formation in India. These solutions, however, should be only treated as references and can be modified/changed.

Introduction

Getting educated is critical for improving one’s ability to produce goods and services. Individuals invest in education to increase future incomes. Governments also invest in education as expanding educational facilities impacts economic development. The chapter discusses how human beings are resources and how investing in human capital formation through education, health, training etc. can contribute to economic growth and development.

Human capital refers to the skills, health, knowledge embodied in human beings that increase productivity. It requires expenditures on education, health care, training programs etc. The major sources of human capital formation are education, health, training, information and migration. Education improves efficiency to produce various goods and services. So individuals and governments invest in education. Health care enhances worker efficiency, so expenditure on preventive and curative health is an investment. Training updates skills and improves expertise. Information dissemination facilitates decision making. Costs incurred in migration also constitute an investment in human capital.

Individuals invest to increase earning capacity. Employers invest to increase workforce efficiency. The government invests to expand educational and health opportunities. The education sector in India has expanded from 2.23 lakh primary schools in 1950-51 with 19.15 lakh enrolments to 12.72 lakh primary schools with 198.9 lakh enrolments in 2014-15. Higher education institutions have also increased to about 665 universities and over 35,000 colleges now.

Human capital formation promotes economic development as educated and healthy people are more productive. However, India faces challenges like rising population, low quality education, insufficient training programs, brain drain and ineffective planning.

India must improve school infrastructure, aim for total literacy especially for females, reduce dropout rates, expand vocational training opportunities leveraging technology, improve health facilities, reform bureaucracy and regulations, develop infrastructure and promote human development. India can gain from the knowledge revolution by focusing on technology and skill development. Overall, India has realised the importance of investing in education and health but has a long way to go to fully develop its human capital.

Textual questions and answers

A. Very short-answer questions (answer in one word/one sentence)

1. State two advantages of educating oneself.

Answer: Education enables individuals to increase their own efficiency and make informed decisions.

2. What is labour?

Answer: Labour refers to the physical and mental manpower that helps to produce goods and services.

3. Is human resource labour?

Answer: Yes, human resource is labour as it is the living factor of production that helps to produce goods and services.

4. Define human capital formation.

Answer: Human capital formation involves all aspects: the size of population and their education, efficiency, level of scientific development, cultural values and social and political institutions. It encompasses all those factors that increase the productive capacity of humans.

5. Why does labour migrate?

Answer: People migrate within and outside the country in search of better jobs.

6. Give two ways by which training can promote human capital formation.

Answer: Enhancing Skills and Knowledge: Training programs provide individuals with the opportunity to acquire new skills and knowledge that are essential for their professional growth, thereby contributing to the formation of human capital.

Improving Workforce Efficiency: Training helps in enhancing the efficiency and effectiveness of the workforce. It equips individuals with the necessary tools and techniques to perform their tasks more efficiently, leading to increased productivity and better quality output.

7. Name the four factors of production.

Answer: The four factors of production are land, labour, capital, and entrepreneurship.

8. Of the four factors of production, which one is an active one?

Answer: Labour is the active factor of production as the owner of this factor needs to be present and participate in the production process.

9. Give any two institutions engaged in the provision of educational services in India.

Answer: Two institutions engaged in the provision of educational services in India are schools and universities.

10. What is an NGO?

Answer: NGO stands for Non-Governmental Organization. It is a non-profit organization that operates independently of the government and is usually focused on addressing social or environmental issues.

11. Why does labour move from one sector to another?

Answer: Labour moves from one sector to another due to various reasons such as better job opportunities, higher wages, better living conditions, and social factors.

12. Name the fastest developing sector to which the factors are shifting towards in recent years.

Answer: The service sector is the fastest developing sector to which the factors are shifting towards in recent years.

13. What is human development?

Answer: Human development refers to the process of improving the quality of life and well-being of people, including their health, education, and standard of living. It is a broader concept than economic development, which focuses only on economic growth.

B. Short-answer questions-I (answer in 30-50 words)

1. Explain why human resources may be referred to as labour.

Answer: Human resources may be referred to as labour because they are the physical and mental manpower that helps in the production of goods and services. They contribute to economic growth and development through their work and skills.

2. How does human capital formation promote economic development?

Answer: Human capital formation promotes economic development by increasing the productivity of human beings through investment in education, health care, training, and enrichment programs . This leads to an increase in the quality and quantity of goods and services produced, which in turn leads to economic growth and development.

3. What is the role of health in the formation of human capital?

Answer: Health plays a crucial role in the formation of human capital as it is necessary to maintain good health to be productive. Preventive health care, such as vaccinations, good diet, exercise, and clean surroundings, helps keep individuals fit and healthy, while curative health care treats diseases or illnesses.

4. Discuss the importance of training in the formation of human capital.

Answer: Training is important in the formation of human capital as it enhances the skills and knowledge of individuals. Through training programs, individuals can acquire new skills, improve existing ones, and stay updated with the latest developments in their field. This leads to increased productivity and contributes to the overall formation of human capital.

5. What is migration? What kind of costs are incurred in planning for migration?

Answer: Migration refers to the movement of people from one place to another in search of better job opportunities. 

Planning for migration incurs costs such as transportation expenses, housing arrangements, and the need to adapt to a new environment. These costs are incurred to facilitate the movement of labour and can contribute to the formation of human capital.

6. Give reasons for the government to invest in human capital formation.

Answer: The government invests in human capital formation for several reasons. Firstly, it helps in improving the overall productivity and efficiency of the workforce. Secondly, it leads to higher economic growth and development. Thirdly, investing in human capital ensures a better quality of life for individuals and promotes social well-being. Lastly, it helps in reducing poverty and inequality by providing equal opportunities for education and healthcare.

7. How does one plan for human capital formation?

Answer: Planning for human capital formation involves various aspects such as identifying the needs and requirements of the workforce, designing educational and training programs, allocating resources for healthcare facilities, and creating policies that promote skill development and employment opportunities. It requires a coordinated effort from the government, educational institutions, healthcare providers, and other stakeholders.

8. State a few agencies that provide health and educational facilities in India.

Answer: Some agencies that provide health and educational facilities in India include the Ministry of Human Resource Development (MHRD), National Council for Educational Research and Training (NCERT), University Grants Commission (UGC), National Council for Technical Education (NCTE), and Indian Council for Medical Research (ICMR). These agencies work towards improving the quality of education and healthcare services in the country.

9. Chalk out the performance of India in provision of elementary education services since independence.

Answer: Elementary education refers to the education level from class 1 to class 8. The enrolment ratio in one elementary school level education has shown a drastic increase, similar to the primary education level. However, Bihar, Rajasthan, and Uttar Pradesh are the three most educationally backward states in India where these ratios have never increased.

10. State the various ways by which India can gain from the knowledge revolution.

Answer: India can gain from the knowledge revolution in various ways. The knowledge revolution can help India take advantage of the shift from manufacturing to the services sector and knowledge resources. 

Technology, organisation, and skills will play a critically decisive role in governing the future course of development. India can take advantage of the knowledge revolution engulfing the world. 

A recent estimate attributes 50-60 per cent of industrial output to be based on information. Management of information on quality, cost, and the production process is the mainstay of modern manufacturing. 

The service sector is going to be knowledge-based. There is great potential in the expansion of medium and small technology-intensive and services sectors. Therefore, India can gain from the knowledge revolution by investing in technology, skills, and knowledge-based services.

11. What has been India’s performance with regard to provision of education and health?

Answer: India has made efforts to provide education and health facilities to its people. Education and health are considered public goods and are provided by the federal government at all levels – central, state, and local. The Ministry of Education has been renamed as the Ministry of Human Resource Development to address the changing educational requirements. 

Autonomous bodies like NCERT, UGC, NCTE, and ICMR have been formed to regulate and improve the quality of education and health services. The private sector also plays a role in providing these services, but government regulation is necessary to ensure quality. However, there are challenges in achieving human capital formation in India, such as ineffective planning leading to an imbalance in the labour market and a lack of skilled labour.

12. Suggest certain reforms that India must undergo to improve its future prospects.

Answer: India must undergo various internal economic reforms to improve its future prospects. These reforms include de-bureaucratization and deregulation of the industrial environment, restructuring of the public sector, developing agricultural and industrial infrastructure, and promoting human development. The last one is not an integral component of the reform package of the government but only a sort of add-on to the policy package. 

The view being that policies for human development or social sector development are supplementary measures required to translate economic growth into an equivalent increase in human well-being. 

India must consider the obvious lessons from the experience of high-performance East Asian and Chinese economies in the last two decades. The policy makers in these economies clearly regarded the causation between human development and economic growth as bi-directional. In operational terms, they consciously developed the human resources to achieve higher economic growth. Therefore, India must focus on promoting human development and investing in its people to achieve higher economic growth.

C. Short-answer questions-II (answer in 60-80 words)

1. Suggest the capital required for provision of health services.

Answer: To provide health services, a certain amount of capital is required. This capital is needed for various purposes such as setting up medical care units or hospitals, establishing super specialty hospitals, and investing in research centers in the field of medicine. These facilities require funds for infrastructure, medical equipment, and the recruitment of skilled healthcare professionals. Additionally, capital is also needed for preventive healthcare measures like vaccination and ensuring sanitized living conditions. The exact amount of capital required for health services can vary depending on the scale and scope of the healthcare facilities being established.

2. Who is an employer? Why must an employer invest in the development of its employees?

Answer: An employer is a person or organization that hires and pays people to work for them. 

Employers invest in the development of their employees to increase their efficiency and productivity. This can be done through in-service training programs, workshops, seminars, orientation programs, and on-the-job training. 

By investing in their employees’ skills and knowledge, employers can improve the quality of their products or services, reduce costs, and increase profits. Additionally, providing a healthy work environment, building team spirit, and offering healthcare, entertainment, and relaxation schedules can also enhance efficiency and reduce frictions among workers.

3. Relate human capital with economic development.

Answer: Human beings are both the end and the means to economic development. Economic development is for the people. It must provide them with better, fuller and secure life. On the other hand, economic development is dependent on the people, their capacity and active participation in increased production of goods and services and by their savings and investment in the future. Improvements in food, education, health, housing and environment are important as they not only contribute directly to a better life, but also increase the productivity of labour, and create an environment that increases production and enhances the quality of life. This creates a sense of well-being in the economy wherein people participate in the process of development.

4. How can human capital be improved in the future?

Answer: Human capital be improved in the future in the following ways:

  • A more than doubling of investment in education from the current level of 3.2 to 4.4 per cent of GNP. This is the soundest policy for quadrupling the country’s GNP per capita. 
  • Vocational training, knowledge and skill of the workforce will be a major determinant of India’s future rate of economic growth as well as the type and number of jobs created.
  • A comprehensive strategy to enhance the nation’s employable skills, including a cataloguing of the entire range of vocational skills required to support development, expansion of the nation’s system of vocational training institutes, widening of the range of vocational skills taught, and active involvement of the private sector in skill delivery.
  • A parallel effort to upgrade the skills of Indian farmers, who represent 56 per cent of the total workforce. 
  • Improving the health of a nation. It is a product of many factors and forces that combine and interact. So, even these need to be stepped up. 

5. Discuss the future prospects for India in improving its educational attainment.

Answer: India has a long way to go in achieving 100% literacy, especially among girls. However, the government has launched many campaigns to promote literacy, such as the National Literacy Mission and “Saakshar Bharat,” which covers all age groups of 15 and above. 

India has a vast potential in the knowledge sector, and Indian technical professionals are in demand all over the world. Therefore, India can leverage its knowledge sector to improve its educational attainment and contribute towards economic growth. 

India can improve its higher education by setting up good quality and better institutions. By doing so, India can attract more students and researchers, which can contribute towards the development of its human capital. 

Overall, the future prospects for India in improving its educational attainment are promising, and the government and private sector must continue to invest in education to realise India’s full potential.

D. Long-answer questions-I (answer in 90-120 words)

1. What are the indicators of educational achievement in a country?

Answer: There are several indicators that can be used to measure educational achievement in a country. These indicators provide insights into the quality and effectiveness of the education system.

  • Literacy Rate: The literacy rate is a common indicator that measures the percentage of the population above a certain age who can read and write. It reflects the basic level of education attained by the population.
  • Enrollment Rates: Enrollment rates indicate the percentage of children of a certain age group who are enrolled in school. Higher enrollment rates suggest better access to education.
  • Completion Rates: Completion rates measure the percentage of students who successfully complete a particular level of education, such as primary, secondary, or tertiary education. Higher completion rates indicate better educational outcomes.
  • Quality of Education: The quality of education can be assessed through various indicators, such as student-teacher ratios, availability of educational resources, and performance on standardised tests. These indicators reflect the effectiveness of the education system in imparting knowledge and skills.
  • Gender Parity: Gender parity in education measures the equality in access to education between males and females. It is important to ensure that both genders have equal opportunities to receive education.
  • Educational Attainment: Educational attainment refers to the highest level of education completed by individuals in a country. It provides an overall picture of the educational achievements of the population.

2. Why do we observe regional differences in educational attainment in India?

Answer: We observe regional differences in educational attainment in India because of the following reasons:

  • Socioeconomic Factors: Regional differences in educational attainment in India can be attributed to socioeconomic factors. Some regions may have higher poverty rates, limited access to educational resources, and lower levels of economic development, which can hinder educational opportunities and outcomes.
  • Infrastructure and Accessibility: Disparities in educational attainment can also be influenced by variations in infrastructure and accessibility. Remote and rural areas may have limited schools, inadequate transportation, and lack of basic amenities, making it difficult for students to access quality education.
  • Cultural and Social Norms: Cultural and social norms prevalent in different regions can impact educational attainment. Some communities may prioritise traditional roles and responsibilities over education, leading to lower enrollment and completion rates, particularly for girls.
  • Government Policies and Investments: Regional differences in educational attainment can be influenced by government policies and investments. Unequal distribution of resources, varying levels of funding, and differing priorities in different regions can contribute to disparities in educational outcomes.
  • Migration and Brain Drain: Migration of skilled individuals from certain regions to more developed areas or abroad can also contribute to regional differences in educational attainment. Brain drain, where educated individuals leave their home regions for better opportunities, can result in a concentration of educational resources and talent in specific areas.

3. What factors contribute to human capital formation?

Answer: Factors that contribute to human capital formation are:

  • Education: Education improves the ability to produce various goods and services. Individuals invest in education as it increases their future incomes. Governments also invest in education as the actual expansion of educational facilities affects economic development.
  • Health: A healthy worker generates more output than a sick or an unhealthy one. Expenditure on health involves preventive health care such as vaccination and sanitised living conditions, as well as curative health care such as treatment, drugs, and medicines.
  • Training and Skill Development: Employers of labour invest in education to increase the efficiency of their workforce. In-service training programs, workshops, and seminars are provided by employers.
  • Information: An efficient system for the dissemination of information facilitates human capital formation. The more easily such information is made available, the better and faster will be the formation of human capital.
  • Migration: Expenditure on movement for better education and work is another source of human capital formation. Costs of transport, housing, and increased use of existing infrastructural facilities are to be borne by the place to which a family migrates.

4. Education is considered an important input for the development of a nation. How?

Answer: Education is considered an important input for the development of a nation for several reasons:

  • Human Capital and Economic Development: Education improves the capacity and active participation of people in increased production of goods and services. It also enhances their savings and investment for the future. This contributes directly to a better life and increases the productivity of labour.
  • Efficiency and Economic Growth: The more and better we educate ourselves, the greater is our efficiency in whatever we choose to do. This leads to higher earnings and contributes towards economic growth.
  • Investment in Education: Individuals invest in education as it increases their future incomes. Governments also invest in education as the actual expansion of educational facilities affects economic development. Expenditure on education is thus a major source of human capital formation.
  • Human Resources: Human capital is the most important means of production. If human resources are well planned to provide education, skills, health information, and migration, the resultant human capital contributes by accelerating economic growth and development.

5. Discuss the following as a source of human capital formation:

(a) Health infrastructure 

Answer: Health is considered an important source of human capital formation. A healthy worker generates more output than a sick or an unhealthy one. Expenditure on health involves provision of preventive health care such as vaccination and sanitized living conditions. It also includes curative health care such as treatment, drugs, and medicines. Setting up medical care units or hospitals is an important source of this type of expenditure. Specialized healthcare facilities like heart, lung, kidney, and other specialized healthcare research centers in the field of medicine are examples of investment in health. Investment in health improves the efficiency of workers and is thus a major source of human capital formation.

(b) Expenditure on migration

Answer: Migration is another source of human capital formation. People migrate within and outside the country in search of better jobs. Expenditure on such movement includes the cost of transport, housing for the migrant population, and increased use of existing infrastructural facilities. All expenditure incurred by labor in moving from one place to another for better education and work is considered a source of human capital formation.

These sources contribute significantly to the formation of human capital, thereby aiding in economic development.

6. Establish the need for acquiring information relating to health and education expenditure for the effective utilisation of human resources.

Answer: Human capital formation involves all aspects, including education and health. It requires sustained and concerted efforts in several areas at the same time. Education, skill development, health, on-the-job training, market information, and migration all lead to the formation of human capital. It encompasses all those factors that increase the productive capacity of humans. To provide education, health facilities, a well-developed information network, and to facilitate migration of labour, investment is needed. Simply put, human capital formation occurs with investment in education, health-care, training, and enrichment programs, exchange of new developments, cultural growth, and communication.

There is a need for investment in health, sanitation, hygiene, and provision of safe drinking water for better human capital. The government has to invest in these critical areas for better human capital.

Therefore, acquiring information relating to health and education expenditure is crucial for effective utilisation of human resources. By investing in education and health, we can improve the quality of human capital, which in turn can lead to economic growth and development. Without proper investment in these areas, human resources cannot be utilised effectively, and the potential for growth and development will remain untapped.

7. Explain how investment in education stimulates economic growth.

Answer: Investment in education stimulates economic growth in several ways:

  • Increased productivity: Education equips individuals with the necessary skills and knowledge to perform their jobs more efficiently. This leads to increased productivity, which in turn contributes to economic growth.
  • Innovation and entrepreneurship: Education fosters innovation and entrepreneurship by providing individuals with the skills and knowledge to develop new ideas and start their own businesses. This leads to the creation of new jobs and industries, which contributes to economic growth.
  • Higher wages: Education is associated with higher wages, as individuals with higher levels of education are more likely to secure higher-paying jobs. This leads to increased consumer spending, which contributes to economic growth.
  • Improved social outcomes: Education is associated with improved health outcomes, reduced crime rates, and increased civic engagement. These outcomes contribute to a more stable and prosperous society, which in turn contributes to economic growth.

8. Bring out the need for on-the-job-training for a person.

Answer: The more a person practices, the better he/she becomes at a task. Along with this, if we consider that skills can also be learned from others, then there remains no limit to the efficiency with which a task can be done. Thus, by studying the knowledge amassed by experts and by learning skills or what we term as training, we can improve our efficiency to work. 

On-the-job training is essential for a person because it provides an opportunity to learn new skills and gain practical experience in a real work environment. It helps individuals to acquire the necessary skills and knowledge to perform their jobs more efficiently. On-the-job training also helps individuals to adapt to new technologies and work processes, which is crucial in today’s rapidly changing work environment. 

Moreover, on-the-job training is beneficial for both the employee and the employer. For the employee, it provides an opportunity to learn new skills and advance their career. For the employer, it helps to improve productivity, reduce turnover, and increase employee satisfaction. 

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

Answer: There are several reasons why promoting women’s education is crucial in India:

  • Empowerment: Education empowers women by providing them with the necessary skills and knowledge to make informed decisions about their lives. It helps them to become financially independent and to participate in the workforce, which contributes to their overall well-being.
  • Health: Educated women are more likely to have better health outcomes for themselves and their families. They are more likely to seek medical care when needed and to make informed decisions about their health.
  • Social development: Educated women are more likely to participate in civic life and to contribute to the social development of their communities. They are more likely to be involved in decision-making processes and to advocate for their rights and the rights of others.
  • Economic growth: Educated women are more likely to participate in the workforce and to contribute to the economic growth of their communities. They are more likely to start their own businesses and to create jobs for others.

10. What are the main problems of human capital formation in India?

Answer: The main problems of human capital formation in India are:

  • Increasing population: The increasing population in India is adversely affecting the economic growth by directly affecting the human capital. The per head availability of the existing facilities has been reduced drastically, which has deteriorated the quality of these available facilities and ultimately lowered the capacity to acquire specialised skills and knowledge.
  • Low academic education: Many universities and boards in India supply inefficient education levels that do not ensure the addition of a skillful labour force.
  • Insufficient training programs: Agriculture is the backbone of the Indian economy but is deprived of professional skills that are essential for a higher level of productivity. Many farmers are still using traditional agricultural techniques due to a lack of knowledge and training programs.
  • Migration: Migration of skilled and educated labour to other countries is a serious threat to the process of capital formation in India. This problem of migration of educated and skilled labour to other countries is known as Brain-drain.
  • Ineffective planning: No efforts have been made to maintain the balance in the labour market. Therefore, India is facing the problem of excess supply of unskilled labour and no supply of skilled labour in the economy.

11. In your view, is it essential for the government to regulate the fee structure in education and health care institutions? If so, why?

Answer: In my view, it is essential for the government to regulate the fee structure in these institutions for the following reasons:

  • Accessibility: Regulating the fee structure ensures that education and health care services are accessible to all, regardless of their financial status. It helps to prevent discrimination against those who cannot afford to pay high fees.
  • Affordability: Regulating the fee structure ensures that education and health care services are affordable for everyone. It helps to prevent the exploitation of students and patients by institutions that charge exorbitant fees.
  • Quality: Regulating the fee structure ensures that institutions maintain a certain standard of quality in their services. It helps to prevent institutions from cutting corners and compromising on the quality of education and health care services.
  • Equity: Regulating the fee structure ensures that everyone has an equal opportunity to access education and health care services. It helps to promote equity and social justice in society.
E. Long-answer questions-II (answer in 130-200 words)

1. Discuss the various sources of human capital formation.

Answer: Various sources of human capital formation are as follows:

  • Education: Education improves the ability to produce various goods and services. Individuals invest in education as it increases their future incomes. Governments also invest in education as it is the actual expansion of educational facilities that affects economic development. Expenditure on education is thus a major source of human capital formation.
  • Health: A healthy worker generates more output than a sick or an unhealthy one. Expenditure on health involves provision of preventive health care such as vaccination and sanitized living conditions, as well as curative health care such as treatment, drugs, and medicines. Setting up medical care units or hospitals is an important source of this type of expenditure.
  • Training: Expenditure on training is undertaken to enhance the employee’s efficiency. This is also known as in-service training. It keeps the workers well-informed, updates their skill and improves their expertise while motivational workshops recharge them to work better.
  • Information: An efficient system for the dissemination of information facilitates human capital formation. The more easily such information is made available, the better and faster will be the formation of human capital.
  • Migration: People migrate within and outside the country in search of better jobs. Expenditure on such movement is another source of human capital formation. Cost of transport, housing of migrant population, increased use of existing infrastructural facilities are all to be borne by the place to which a family migrates.

2. Should investment in human capital formation be undertaken? If yes, then who all can undertake this investment?

Answer: Yes, investment in human capital formation should be undertaken. This can be undertaken by the following:

  • Individuals: Individuals can invest in their own human capital formation by spending on training programs, knowledge-building exercises, and education. Parents can spend on their children’s education and training because they know that education secures better and well-paid jobs for their progeny.
  • Government: The government can undertake investment in human capital formation by opening schools, colleges, universities, vocational training institutes, and research centres. The government can also invest in health care facilities, on-the-job training, and research and development.
  • Private sector: The private sector can undertake investment in human capital formation by providing on-the-job training, sponsoring education and training programs, and investing in research and development.

3. How has India fared in the provision of health and education to its people? Support your answer with a brief description of the programmes initiated by the government.

Answer: India has realised the importance of providing education and health facilities to its people. The government has initiated several programs to improve the provision of education and health facilities. Some of these programs are:

  • Sarva Shiksha Abhiyan (SSA): SSA is a flagship program of the government of India to provide universal elementary education to all children in the age group of 6-14 years. The program aims to provide quality education to all children, especially those from disadvantaged sections of society.
  • Mid-Day Meal Scheme: The Mid-Day Meal Scheme is a school meal program of the government of India to improve the nutritional status of school-going children. The program provides free lunch to children in government and government-aided schools.
  • National Rural Health Mission (NRHM): NRHM is a flagship program of the government of India to provide accessible, affordable, and quality health care to the rural population. The program aims to improve the health status of the rural population by providing essential health care services.
  • Rashtriya Swasthya Bima Yojana (RSBY): RSBY is a health insurance scheme of the government of India to provide health insurance coverage to the below poverty line (BPL) families. The program aims to provide financial protection to BPL families against high health care costs.

4. Explain the challenges in the formation of human capital in India.

Answer: The challenges in the formation of human capital in India are:

  • Increasing population: The increasing population in India is adversely affecting the economic growth by directly affecting the human capital. The per head availability of the existing facilities has been reduced drastically, which has deteriorated the quality of these available facilities and ultimately lowered the capacity to acquire specialised skills and knowledge.
  • Low academic education: Many universities and boards in India supply inefficient education levels that do not ensure the addition of a skillful labour force.
  • Insufficient training programs: Agriculture is the backbone of the Indian economy but is deprived of professional skills that are essential for a higher level of productivity. Many farmers are still using traditional agricultural techniques due to a lack of knowledge and training programs.
  • Migration: Migration of skilled and educated labour to other countries is a serious threat to the process of capital formation in India. This problem of migration of educated and skilled labour to other countries is known as Brain-drain.
  • Ineffective planning: No efforts have been made to maintain the balance in the labour market. Therefore, India is facing the problem of excess supply of unskilled labour and no supply of skilled labour in the economy.

Additional/extra questions and answers

1. Why has the government in many countries made education compulsory after a certain age?

Answer: In fact, in many countries the government has made it compulsory to send every child after a certain age to school. This emphasis is due to the importance of education in ensuring better futures for their citizens and its role in national development.

2. What are the advantages that man possesses over other beings?

Answer: Man has certain advantages over all other beings: to think, to store knowledge and to pass it on to others.

3. How does practicing a task affect an individual’s performance?

Answer: The more a person practices, the better he/she becomes at a task. Along with this, if we consider that skills can also be learnt from others, then there remains no limit to the efficiency with which a task can be done.

4. Why is it important to learn from experts and undergo training?

Answer: By studying the knowledge amassed by experts and by learning skills or what we term as training, we can improve our efficiency to work. Thus, the more and better we educate ourselves, the greater is our efficiency in whatever we choose to do.

5. What are the broader benefits of education beyond preparing one to earn a livelihood?

Answer: Besides preparing you to earn a livelihood, education has far-reaching effects on you. It enables you to increase your own efficiency, know and understand the world you live in, take informed decisions, work for the benefit of self and economy, achieve a better status in your social circle, make use of new inventions, understand the changing technology, and create innovations.

6. What will be discussed in this chapter regarding human beings as resources?

Answer: In this chapter, we shall learn how human beings are resources and how this human resource can be developed as human capital. We will explore the differences between Human Development and human capital formation, understand the contributing factors to human capital formation, discuss if it’s possible to plan for human capital formation, delve into how the State can contribute to human capital formation, and examine how India has fared in this respect. Other related issues will also be discussed.

7. How do we distinguish between human beings as manpower resource and as capital?

Answer: Human beings are a resource as they help to produce goods and services, termed as human resource which is the living factor of production. As economies have progressed, the primary factor of production, labour, has developed its capabilities with the help of education and training, leading to the emergence of skilled scientists, teachers, doctors, and specialists, which is termed as human capital. Human capital refers to the productive investment embodied in human persons, including skills, abilities, ideals, and health, resulting from expenditure on education and training. On the contrary, physical capital is tangible assets like machinery and equipment.

8. How does human capital formation occur?

Answer: Human capital formation occurs with investment in education, health-care, training and enrichment programmes, exchange of new developments, cultural growth, and communication. It encompasses all those factors that increase the productive capacity of humans. An economy needs to plan for investment in schools, colleges, research institutions, laboratories, hospitals, dispensaries, medicine manufacturing industries, transport, communications, clubs, libraries, museums and so many other related fields. It is the investment in these areas that becomes the source for human capital.

9. What are the factors involved in human capital formation?

Answer: Human capital formation involves all aspects: the size of population and their education, efficiency, level of scientific development, cultural values, and social and political institutions. Education, skill development, health, on-the-job training, market information, and migration all lead to the formation of human capital.

10. What is the role of education in human capital formation?

Answer: Education improves the ability to produce various goods and services. This is why people invest in it. Individuals invest in education as it increases their future incomes. Governments also invest in education as it is the actual expansion of educational facilities that affects economic development. The State opens schools, colleges, universities, vocational training institutes, and research centres. Expenditure on education is thus a major source of human capital formation.

11. Why is expenditure on health considered an important source of human capital?

Answer: A healthy worker generates more output than a sick or an unhealthy one. Expenditure on health involves the provision of preventive health care such as vaccination and sanitised living conditions. It also includes curative health care such as treatment, drugs, and medicines given by a doctor when a person feels sick or is infected with a disease. Setting up medical care units or hospitals, super speciality hospitals such as heart, lung, kidney, and other specialized healthcare, research centers in the field of medicine, and diagnostic and testing laboratories are some examples of investment in health. Since investment in health improves the efficiency of workers, it is a major source of human capital formation.

12. How does training enhance human efficiency?

Answer: Expenditure on training is undertaken to enhance the employee’s efficiency. This is also known as in-service training. It keeps the workers well-informed, updates their skill, and improves their expertise while motivational workshops recharge them to work better. These days Yoga workshops have become an integral part of an employee’s in-service training as this age-old practice sets in mind-body coordination which enhances work efficiency. Expenditure on training is thus a source of human capital formation as it improves human efficiency to work.

13. Why is information important in human capital formation?

Answer: An economy has to have an efficient system for the dissemination of information. A well-developed information system facilitates human capital formation. The more easily such information is made available, the better and faster will be the formation of human capital. Collection of information involves activities like attending education fairs, collecting brochures, attending counseling, and visiting websites to know of the best and latest opportunities.

14. How does migration contribute to human capital formation?

Answer: People migrate within and outside the country in search of better jobs. Expenditure on such movement is another source of human capital formation. Cost of transport, housing of the migrant population, and increased use of existing infrastructural facilities are all to be borne by the place to which a family migrates. Thus, all expenditure incurred by labor in moving from one place to another for better education and work is a source of human capital formation.

15. Who undertakes the investment in human capital formation?

Answer: Both individuals and the economy invest in these sources of human capital formation. Individuals invest because they want to increase their earning capacity by spending on training programmes and knowledge-building exercises. Employers of labor invest in education to increase the efficiency of their workforce, providing in-service training programmes, workshops, and seminars. The State or the government also invests, as it is committed to the expansion of educational opportunities, health opportunities, and skill development. Most of the economies of the world spend a large proportion of the GDP in this area.

16. What is the role of human beings in economic development?

Answer: Human beings are both the end and the means to economic development. Economic development is for the people. It must provide them with better, fuller and secure life. On the other hand, economic development is dependent on the people, their capacity and active participation in increased production of goods and services and by their savings and investment in the future.

17. What did Frederick.H. Harbison write about human resources in 1973?

Answer: Frederick.H. Harbison had written way back in 1973 that: “Human resources….. constitute the ultimate basis for the wealth of nations. Capital and natural resources are the passive factors of production; human beings are the active agents who accumulate capital, exploit natural resources…. and carry forward national development. Clearly, a country which is unable to develop the skills and knowledge of its people and to utilise them effectively in the national economy will be unable to develop anything else.”

18. How is the role of health maintenance significant in enhancing human capabilities?

Answer: The role of health maintenance in enhancing human capabilities is unquestionable because it allows individuals to produce more and better. Health, along with education, is considered as two core components not only for economic growth but also for economic development.

19. What is the Plan Vision 2020’s view on human resources for India’s development?

Answer: The Plan Vision 2020 realises that human resources are the most important determinants of overall development. It emphasizes that human resources can be enhanced by: (i) More than doubling of investment in education. (ii) Vocational training, knowledge, and skill of the workforce as major determinants of India’s future rate of economic growth. (iii) A comprehensive strategy to enhance the nation’s employable skills. (iv) A parallel effort to upgrade the skills of Indian farmers. (v) Improving the health of a nation, among other factors.

20. Which sectors need to be improved for the betterment of human capital and economic development?

Answer: Economic growth, per capita income, employment, literacy, education, age at marriage, birth rates, availability of information regarding health care and nutrition, access to safe drinking water, public and private health care, infrastructure, access to preventive health and medical care, and health insurance are the contributing factors for a better human capital and economic development.

21. How does increasing population affect human capital formation in India?

Answer: Increasing population is adversely affecting the economic growth of India by directly affecting the human capital. As per the data, the per head availability of the existing facilities has been reduced drastically. Consequently, the quality of these available facilities has deteriorated and ultimately lowered the capacity to acquire specialised skills and knowledge.

22. Why is there a problem with academic education in India?

Answer: There is a problem with academic education in India because, despite the presence of numerous Universities and Boards, most of these universities supply an inefficient education level which does not lead to the addition of a skillful labour force.

23. Why is agriculture in India not achieving its potential productivity?

Answer: Agriculture is the backbone of the Indian economy but is deprived of professional skills which are essential for a higher level of productivity. Many farmers are still using traditional agricultural techniques due to a lack of knowledge and training programmes.

24. What challenge does migration pose to human capital formation in India?

Answer: Migration of skilled and educated labour to other countries is a serious threat to the process of capital formation in India. This problem of migration of educated and skilled labour to other countries is known as Brain-drain.

25. Why is there an imbalance in the labour market in India?

Answer: No efforts have been made to maintain the balance in the labour market. As a result, India is facing the problem of excess supply of unskilled labour and no supply of skilled labour in the economy.

26. Who provides education and health facilities in India at various levels?

Answer: Education and health are public goods which are provided by the federal government at all the three levels, namely central, state, and local levels in India. There are Central schools, State-level schools, and schools run by local bodies such as the Municipality schools and Shiksha Parishad schools.

27. Why did the Ministry of Education change its name to Ministry of Human Resource Development (MHRD)?

Answer: The Ministry of Education changed its name to Ministry of Human Resource Development (MHRD) to accommodate the fast changing educational requirements of the country.

28. Mention some autonomous bodies formed to buffer the education system from undue political pressures.

Answer: To buffer the education system from undue political pressures, autonomous bodies such as the National Council for Educational Research and Training (NCERT), the University Grants Commission (UGC), the National Council for Technical Education (NCTE) for the education sector and the Indian Council for Medical Research (ICMR) for the health sector have been formed.

29. Why is it important for the government to guide and regulate the private sector in education and health?

Answer: It is important for the government to guide and regulate the private sector in education and health to monitor the quality since the private sector produces these services and it is profitable for them to provide these services.

30. How are NGOs or privately operated social service bodies contributing in the fields of education and health?

Answer: NGOs or privately operated social service bodies play an important role in both the education and health sectors. These bodies are engaged in running non-formal education, developing employment-oriented skills, and in sensitising slum dwellers and the poor to live hygienically and to take care of their health.

31. What is the focus of the “Education for All” campaign promoted by the Five Year Plans?

Answer: In the Five Year Plans, the focus of the “Education for All” campaign is to promote the expansion of primary education, ensuring that a large proportion of the population achieves the basic primary education level.

32. Describe the growth of secondary education in India from 1950-51 to 2014-15.

Answer: In 1950-51, there were 7.4 thousand secondary education level schools with 15 lakh enrollments. By 2014-15, about 3.42 lakh schools were providing secondary education to 482 lakh students. The Government took the initiative to increase the enrollment of students by opening many more central and government schools which provide day meal facilities, stationery, books, and uniforms to all the students.

33. How is the University Grants Commission (UGC) associated with higher education in India?

Answer: The University Grants Commission (UGC) regulates and guides higher education in India.

34. What special arrangements have been made for adult and female education in India?

Answer: Special arrangements have been made for adult and female education in India. A Separate Women Education Council has been set up to provide technical education to women. Many women polytechnics have also been established. The Government has started many total literacy campaigns, and the National Literacy Mission was launched to render literacy for everyone in the economy. This was further converted into “Saakshar Bharat” with a central focus on female education, covering all age groups of 15 and above.

35. Explain the significance of elementary and secondary education from the point of view of human development.

Answer: From the point of view of human development, education at all levels is desirable. However, it is agreed that gains from elementary and secondary education are far greater than those from higher education. Elementary and secondary education lay the foundation for advanced learning and skill development, equipping individuals with the basic knowledge and capabilities necessary for personal and societal advancement.

36. What future prospects does India have in the educational sector?

Answer: India has to go a long way in achieving the educational attainment of 100 per cent literacy, especially of the girl child. Higher education also needs improvement by setting up good quality institutions. A tremendous expansion of schools and classrooms will be required to support quantitative and qualitative improvement in the country’s school system. Efforts are required to reduce the number of students per class to 20. By 2030, it is anticipated that all males of 40 years and below (those born after 1990) will be educated.

37. What are some of the internal economic reforms that India needs to undertake to face the challenges of globalisation?

Answer: India is still struggling to undergo a variety of internal economic reforms to face the challenges of globalization. Among these reforms are: (i) de-bureaucratization and deregulation of the industrial environment, (ii) restructuring of the public sector, (iii) developing agricultural and industrial infrastructure, and (iv) promoting human development. Policies for human development or social sector development should not be supplementary measures but integral components to ensure economic growth translates into increased human well-being.

38. How do the policy makers of high performance East Asian and Chinese economies regard the relationship between human development and economic growth?

Answer: The policy makers in the high performance East Asian and Chinese economies clearly regarded the causation between human development and economic growth as bi-directional. In operational terms, they consciously developed the human resources to achieve higher economic growth, understanding that human development is both a driver and an outcome of economic prosperity.

39. Describe the potential that India holds in the knowledge sector.

Answer: India has a vast potential in the knowledge sector in the years to come as Indian technical professionals are in demand all over the world. Outsourcing of business processes, laboratory research, and transcription services hold tremendous scope for Indian youth. The knowledge revolution engulfing the world means that a significant portion of industrial output is based on information. Managing information on quality, cost, and the production process is crucial in modern manufacturing, and the service sector is becoming increasingly knowledge-based. India can tap into the expansion of medium and small technology-intensive sectors and services.

Additional/extra MCQs

1. At what age do parents typically start sending their children to school?

A. Two or three years B. Four or five years C. Six or seven years D. Eight or nine years

Answer: B. Four or five years

2. Which of the following is NOT an advantage of man over other beings?

A. To think B. To fly C. To store knowledge D. To pass on knowledge

Answer: B. To fly

3. What happens when a person practices a task regularly?

A. They forget the task B. They become worse at it C. Their efficiency decreases D. They become better at it

Answer: D. They become better at it

4. Which of the following is NOT a far-reaching effect of education mentioned in Box 6.1?

A. Increase your own efficiency B. Understand animal behavior C. Work for the benefit of self and economy D. Understand the changing technology

Answer: B. Understand animal behavior

5. What does human capital formation entail?

A. Short-term planning B. Immediate returns C. Long-term planning and investment D. Avoidance of education

Answer: C. Long-term planning and investment

6. According to Michael P. Todaro, what is embodied in human capital?

A. Machinery and equipment B. Skills, abilities, ideals, health C. Buildings and tangible assets D. Only on-the-job-training programmes

Answer: B. Skills, abilities, ideals, health

7. What differentiates physical capital from human capital?

A. Human capital involves on-the-job training only B. Physical capital includes skills and abilities C. Physical capital involves tangible assets like machinery D. Human capital is not important for economic growth

Answer: C. Physical capital involves tangible assets like machinery

8. Why do individuals undergo training and education?

A. To degrade their capabilities B. To increase their entertainment C. To ensure they remain unskilled D. To improve their efficiency to work

Answer: D. To improve their efficiency to work.

9. Which of the following is a major source of human capital formation?

A. Investment in art galleries B. Investment in luxury cars C. Investment in schools and colleges D. Investment in theme parks

Answer: C. Investment in schools and colleges

10. Why do individuals invest in education?

A. To enjoy holidays B. To collect books C. To increase future incomes D. To engage in sports activities

Answer: C. To increase future incomes

11. What is a major benefit of a healthy worker in the context of human capital?

A. They take more holidays B. They require more medical care C. They generate more output D. They require more training

Answer: C. They generate more output

12. Which of the following is NOT a factor involved in human capital formation?

A. Level of scientific development B. Popularity of celebrities C. Education efficiency D. Cultural values

Answer: B. Popularity of celebrities

13. Expenditure on which of the following is considered a source of human capital formation due to its role in improving human efficiency to work?

A. Leisure activities B. Training C. Tourist visits D. Watching movies

Answer: B. Training

14. An efficient system for the dissemination of what facilitates human capital formation?

A. Entertainment B. Latest fashion trends C. Information D. Luxury items

Answer: C. Information

15. People migrating in search of better jobs is an expenditure related to which source of human capital formation?

A. Education B. Health C. Training D. Migration

Answer: D. Migration

16. Which entity or entities invest in the sources of human capital formation?

A. Only individuals B. Only companies C. Both individuals and the economy D. Only international organizations

Answer: C. Both individuals and the economy

17. Who are the active agents in accumulating capital and exploiting natural resources?

A. Universities B. Governments C. Human beings D. Natural resources

Answer: C. Human beings

18. What is the significance of health maintenance?

A. It limits human capabilities. B. It is only essential for physical well-being. C. It enhances human capabilities to produce more and better. D. It has no connection to economic development.

Answer: C. It enhances human capabilities to produce more and better.

19. Which of the following best describes the Plan Vision 2020’s stance on human resources?

A. They are a minimal part of development. B. They are the most important determinants of overall development. C. They are unrelated to the country’s GNP. D. They only concern the country’s health sector.

Answer: B. They are the most important determinants of overall development.

20. How has the increasing population in India affected human capital?

A. It has increased the quality of facilities. B. It has no effect on human capital. C. It has improved the specialized skills and knowledge. D. It has lowered the capacity to acquire specialized skills and knowledge.

Answer: D. It has lowered the capacity to acquire specialized skills and knowledge.

21. What is the issue with most universities in India concerning academic education?

A. They provide efficient education. B. They supply an inefficient education level. C. They focus only on skillful labor force. D. They are too few in number.

Answer: B. They supply an inefficient education level.

22. Why are many Indian farmers still using traditional agricultural techniques?

A. Due to an abundance of modern tools. B. Due to lack of knowledge and training programmes. C. They prefer traditional methods. D. Modern techniques are less effective.

Answer: B. Due to lack of knowledge and training programmes.

23. What challenge is posed by the migration of skilled and educated labour from India?

A. Increase in economic growth. B. Increase in human capital. C. Brain-gain. D. Brain-drain.

Answer: D. Brain-drain.

24. What problem is India facing concerning its labour market?

A. There is a shortage of unskilled labour. B. There is an excess supply of skilled labour. C. Excess supply of unskilled labour and no supply of skilled labour. D. Balanced supply of both skilled and unskilled labour.

Answer: C. Excess supply of unskilled labour and no supply of skilled labour.

25. Who provides education and health facilities in India at various levels?

A. Central Government only B. State Government only C. Local bodies only D. All three levels: Central, State, and Local

Answer: D. All three levels: Central, State, and Local

26. What was the original name of the Ministry of Human Resource Development (MHRD)?

A. Ministry of Public Health B. Ministry of Education C. Ministry of Skill Development D. Ministry of Welfare

Answer: B. Ministry of Education

27. Which autonomous body is responsible for medical research in the health sector?

A. NCERT B. UGC C. NCTE D. ICMR

Answer: D. ICMR

28. Who monitors the quality of services provided by the private sector in education and health?

A. National Council for Educational Research and Training B. Government C. National Council for Technical Education D. Indian Council for Medical Research

Answer: B. Government

29. What is the role of Kherwadi Social Welfare Association at Bandra?

A. Providing higher education B. Giving vocational training to school dropouts C. Promoting female education D. Campaigning for literacy

Answer: B. Giving vocational training to school dropouts

30. What is the main aim of the “Education for All” campaign during the Five Year Plans?

A. Expansion of primary education B. Expansion of higher education C. Expansion of vocational education D. Expansion of adult education

Answer: A. Expansion of primary education

31. How many universities provide higher education in India?

A. 3.42 lakh B. 482 lakh C. 665 D. 2.5 crore

Answer: C. 665

32. Which council has been set up specifically for women’s technical education?

A. University Grants Commission B. National Council for Technical Education C. Women Education Council D. National Council for Educational Research and Training

Answer: C. Women Education Council

33. The National Literacy Mission was later converted into which program?

A. Saakshar Bharat B. Beti Bachao, Beti Padhao C. Sarva Shiksha Abhiyan D. Rashtriya Madhyamik Shiksha Abhiyan

Answer: A. Saakshar Bharat

34. Gains from which levels of education are considered greater than those from higher education?

A. Primary and Elementary B. Elementary and Secondary C. Vocational and Professional D. Adult and Female

Answer: B. Elementary and Secondary

35. By 2030, which age group of males will be educated?

A. All males above 40 years B. All males of 40 years and below C. All males of 50 years and below D. All males above 50 years

Answer: B. All males of 40 years and below

36. What is described as the mainstay of modern manufacturing?

A. Technology B. Knowledge C. Management of information D. Service sector

Answer: C. Management of information

37. What does India need to undergo to face the challenges of globalization?

A. Internal economic reforms B. Expansion of the service sector C. Increase in the number of universities D. Restructuring of the public sector

Answer: A. Internal economic reforms

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