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Chapter 5 - 5 HUMAN CAPITAL FORMATION IN INDIA After...

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After studying this chapter, the learners will understand the concepts of Human Resources, Human Capital Formation and Human Development have understood the links between investment in human capital, economic growth and human development have understood the need for government spending on education and health have learnt about the state of India’s educational attainment. H UMAN C APITAL F ORMATION IN I NDIA 5
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83 HUMAN CAPITAL FORMATION IN INDIA 5.1 I NTRODUCTION Think of one factor that has made a great difference in the evolution of mankind. Perhaps it is man’s capacity to store and transmit knowledge which he has been doing through conversation, through songs and through elaborate lectures. But man soon found out that we need a good deal of training and skill to do things efficiently. We know that the labour skill of an educated person is more than that of an uneducated person and hence the former is able to generate more income than the latter and his contribution to economic growth is, consequently, more. Education is sought not only as it confers higher earning capacity on people but also for its other highly valued benefits: it gives one a better social standing and pride; it enables one to make better choices in life; it provides knowledge to understand the changes taking place in society; it also stimulates innovations. Moreover, the availability of educated labour force facilitates adaptation of new “... the wisdom of expending public and private funds on education is not to be measured by its direct fruits alone. It will be profitable as a mere investment, to give the masses of people much greater opportunities than they can generally avail themselves of. For by this means many, who would have died unknown, are enabled to get the start needed for bringing out their latent abilities”. Alfred Marshall Fig. 5.1 Adequate education and training to farmers can raise productivity in farms
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84 INDIAN ECONOMIC DEVELOPMENT technologies. Economists have stressed the need for expanding educational opportunities in a nation as it accelerates the development process. 5.2 W HAT IS H UMAN C APITAL ? Just as a country can turn physical resources like land into physical capital like factories, similarly, it can also turn human resources like students into human capital like engineers and doctors. Societies need sufficient human capital in the first place —in the form of competent people who have themselves been educated and trained as professors and other professionals. In other words, we need good human capital to produce other human capital (say, doctors, engineers...). This means that we need investment in human capital to produce more human capital out of human resources. Let us understand a little more of what human capital means by posing the following questions : (i) What are the sources of human capital?
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