Human Capital Formation in India Class 11 Notes: CBSE Economics (Indian Economic Development) Chapter 4

Human Capital

It refers to a person's store of talent, aptitude, expertise, education, and knowledge that will contribute in enhancing labour productivity, and increased future income..

Major Sources of Human Capital in Country

1. Expenditure on Education: It is one of the primary sources of human capital development. Investment in education is not only highly productive, but it also generates growing returns and promotes economic progress. Of all the resources, education receives the greatest attention because it contributes the most to the country's development.

2. Expenditure on Health: Health is a crucial factor for the development of a nation. An ailing individual with insufficient health and medicare facilities is forced to stop working, resulting in a loss of output, also in case the said individual works despite poor health, then also there is a loss of productivity and output. The various forms of health expenditure are preventive medicine, curative medicine, social medicine, provision of clean drinking water, etc.

3. On the job training: On and off campus training of employees, in terms of training by a supervisor in the firm itself, or training at an off campus location enhances the skill and productivity of an individual,  and makes him more accustomed to the work environment and work he is supposed to do.

4. Migration: Migration to other locations within or outside the country either due to unemployment or better professional opportunities is also a source of human capital formation.

5. Information: A person incurs expenses in terms of acquiring information about labour markets, product markets, capital markets, and education, health in order to ensure efficient utilisation of human stock and take better decisions regarding them. This is also a part of human capital formation.

Importance of Human Capital Formation

1. Boosts productivity: Human capital development through investment in education boosts productivity and output by ensuring that workers are aware and skilled (use of the resources). Increased productivity and quality output are dependent on people's technical skills, which can only be acquired through the investment in education or training, as well as their overall health.

2. Control of population growth: It has been noticed that educated people have smaller families than illiterate people, implying that education must be widely diffused to reduce population growth.

3. Improves Quality of life: The quality of a population is determined by a person's degree of education, health, and skill development. Human capital development not only makes people more productive and creative, but it also changes their lives.

4. Increases life expectancy: Human capital development increases people's life expectancy. People can live a healthy and long life if they have access to health care and nutritious food. As a result, the quality of life improves.

5. Effective use of physical capital: A person who is well trained, with appropriate skills will have a better understanding of the physical tools and equipment, as well as he will be able to find out the best possible ways to make the best use of them.

Human Capital and Economic Growth

In Class 11 Economics, Human Capital is explained as the skills, knowledge, and health that individuals gain through education and training, making them more productive members of the workforce. Economic growth depends significantly on Human Capital because a skilled and healthy population is crucial for increasing productivity, fostering innovation, and achieving sustainable development. The chapter emphasizes that when a country invests in education and healthcare, it strengthens its economic foundation, leading to improved job opportunities, higher incomes, and overall better living standards for its people.

Reasons for Poor Human Capital Formation

1. Insufficient Resources: The resources given to the development of human capital have been far less than those required to meet the country's educational and health demands. As a result, the facilities for developing human capital have remained woefully inadequate.

2. Serious Inefficiencies: There are numerous wastes of society's resources because the capabilities of educated individuals are either not exploited or are underutilized while they are unemployed. Other inefficiencies that have not been promptly and appropriately addressed include widespread literacy, the non-education of children, especially in rural areas and slums, and poor health facilities.

3. High Growth of population: The quality of human capital has deteriorated as the population continues to grow.

4. Lack of proper manpower planning: There is a mismatch between demand and supply for numerous categories of human resources, particularly in the case of highly qualified employees. Waste of human resources has come from the lack of such balancing.

5. High Poverty Levels: Majority of the population lives in poverty, and they don’t even have access to the three basic necessities of life, this ultimately impacts the building of human capital.

Human Capital and Human Development:

Human Capital and Human Development are closely related concepts. Human Capital refers to the skills, knowledge, and health that people acquire through education and training, which enhance their productivity and economic contribution. On the other hand, Human Development is a broader concept that focuses on improving people's overall well-being, including access to education, healthcare, and a decent standard of living. While Human Capital emphasises economic growth through a skilled workforce, Human Development emphasises improving the quality of life. Together, they show that investing in people not only boosts economic productivity but also leads to a more equitable and fulfilling society.

Physical Capital

It encompasses all the inputs required for further production, such as plant and machinery, factories, buildings, raw materials, and so on.

Difference Between Human Capital and Physical Capital

Difference between Human Capital and Human Development

State of Human Capital Formation in India

The state of Human Capital Formation in India is discussed as a crucial factor for the country’s economic progress. Despite significant improvements in education and health over the years, India still faces challenges in fully developing its human capital. Limited access to quality education, particularly in rural areas, and inadequate healthcare services are major hurdles. Additionally, government spending on education and health is lower compared to other developing countries, which affects the pace of human capital formation. However, ongoing initiatives like the National Education Policy and health missions aim to address these issues. Improving Human Capital Formation is essential for India to achieve sustained economic growth and improve the quality of life for its people.

Education

It refers to the process of teaching, training, and learning, which takes place mostly in schools and colleges, to increase their knowledge and skills.

• Growth of Education Sector in India

In the sphere of education, there has been significant progress. From 1950 to 1951, the number of schools climbed from 230.7 thousand to 1,215.8 thousand (2005-06). During the same time, the number of teachers climbed from 751 thousand to 6010 thousand, while the number of pupils increased from 23,800 thousand to 2,22,700 thousand.

• Gross Enrollment Ratio

The Gross Enrollment Ratio (GER) is the total number of students enrolled in a grade, cycle, or level of education, regardless of age, represented as a percentage of the population of the matching eligible official age group in a particular school year. From 82 percent in 1950-51 to 94.85 percent in 2005-06, GER in primary education has gradually increased.

Education Sector in India

• Elementary Education: Elementary education in India entails eight years of learning beginning at the age of six, i.e., primary, and middle school education combined. As a result, elementary education is the bedrock upon which the development of all citizens and the nation is built. Elementary education has been made compulsory and free by the government. However, achieving the goal of universal primary education in India has proven to be a difficult task.

• Secondary Education: Secondary education, which begins in grades IX and X and ends in grades XI and XII, strives to develop basic skills and analytical ability. It serves as a stepping- stone to more advanced professional and technical training.

• Higher Education: Both general and technical education are part of the higher education system. Since independence, higher education has grown in leaps and bounds. The country's university population has grown from 27 in 1950-51 to 350 in 2005-06. 

The University Funding Commission (UGC) is responsible for promoting and coordinating university education, as well as determining and maintaining standards in teaching, assessment, and research, as well as allocating and disbursing grants to universities.

Problems/ Weakness in Education Sector

1. High Illiteracy: According to the 2001 census, the literacy rate was 64.8 percent, which is still considerably below the national average of 100 percent.

2. Gender Bias: In India, education is skewed toward women. The number of girls enrolled in basic and upper primary levels is significantly lower than that of boys.

3. Low Quality Education: The educational system is of poor quality, with major focus on theory and learning, and less consideration to practical learning. Though the new education policy has a number of positive aspects that may contribute to the betterment of the education sector in India.

4. Lack of Vocational and Technical Training: There is an overabundance of emphasis on general education, which neglects vocational and technical education.

5. Low Level of Government Expenditure: The actual amount of spending is far less than the desired level of expenditure which should be made.

Primary Education Schemes

1. Sarva Shiksha Abhiyan (SSA)

It was founded in 2001 with the goal of universalizing and improving the quality of elementary education in India through community ownership. The SSA is being implemented in collaboration with governments to meet the needs of children aged 6 to 14.

2. National Programme for Education of Girls at Elementary Education (NPEGEL)

The goal of the initiative is to improve girls' education by giving additional support for the construction of a model girl-friendly school. In every cluster, there is a greater emphasis on community mobilisation and monitoring of girls' school enrollment. 35,252 model schools have been established under NPEGEL.

3. Kasturba Gandhi Balika Vidyalaya (KGBV)

The Kasturba Gandhi Balika Vidyalaya (KGBV) scheme was inaugurated in July 2004 with the goal of establishing residential schools for girls from the SC, ST, OBC, and minority communities at the upper elementary level. The scheme ran for two years before being integrated into the Sarva Siksha Abhiyan on April 1, 2007.

5 Important Topics of Class 11 Economics Chapter 4 Human Capital Formation in India

Importance of Economics Human Capital Formation in India Class 11 Notes

• Revision notes help students understand the key aspects of improving life in rural areas.

• They save time by focusing on essential information and skipping unnecessary details.

• The notes highlight that better education and health lead to a more skilled and healthy workforce, increasing productivity and efficiency in various sectors.

• The PDF format discusses how a well-educated population contributes to higher levels of research, development, and innovation, driving the nation towards progress.

• The human capital formation notes explains that human capital formation helps in reducing economic disparities by providing equal opportunities for education and healthcare.

• They increase confidence by clearly understanding what to expect in exams.

Tips for Learning the Class 11 Economics Chapter 4 Human Capital Formation in India

• Learn the fundamental concepts of human capital, including its definition and importance in economic growth.

• Understand the differences between human capital and physical capital, and why human capital is often considered more valuable in the long term.

• Learn about the effects of these reforms on different sectors of the Indian economy, such as industry, trade, and services.

• Relate the concepts to real examples from India, such as the impact of educational reforms or public health campaigns. This will help you see how theoretical concepts apply in real life.

Conclusion:

The revision notes for Class 11 Economics Chapter 4 on Human Capital Formation in India provided by Vedantu offer a clear and detailed understanding of the chapter’s key concepts. These notes break down the importance of education and health in building a strong economy, making it easier for students to grasp and remember essential points. By using these notes, students can effectively prepare for their exams and gain a solid foundation in the role of human capital in economic development.

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