What factors contribute to human capital formation Economics CBSE class 11 ncert

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What factors contribute to human capital formation? -Economics CBSE class 11 ncert

Book: Indian Economic Development
Chapter 5: Human Capital Formation in India
(NCERT textbook questions)


By:Aparna-Dasgupta

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Factors which contribute to human capital formation:
Expenditure on education: Expenditure on educational investment enables one to develop intellectual skills, earn higher income, make better choices in life and provides knowledge to understand the changes taking place in society to stimulate innovation. It provides better social standing and pride. It not only enables to have higher earning capacity but also helps seek highly valued benefits. The quality of human resources is determined by the level of expenditure on education. So, higher the educational expenditure, faster is the growth of human capital formation for economic development of a nation.
Expenditure on health: The role of health in the development of human capital is vital. To prevent a population from being a liability on a country, the government must pay adequate attention towards the health of the public. This is possible only with government expenditure on health infrastructure. Educated people will spend on their child's health and education, thus providing the nation with a bright future. The level of income earned increases with the expenditure on health because the productive capacity of the working population depends on health expenditure. Over the last few decades, India has developed health infrastructure and manpower at all levels of government and private health care centres. This enables to progress in improving the health of the population.
On-the-job training: Expenditure on on-the-job training is a source of human capital formation because it provides return in the form of increased labour efficiency and productivity. The benefits of training are more than the cost of training given to workers.
Migration: People migrate from one place to another in search of better jobs and higher earnings than a previous job. Mostly people migrate from rural areas to urban areas or from one country to another country to receive good returns for their work. It involves the cost of transport and cost of living in different places. However, people tend to migrate as the benefit is higher than the cost of migration. In this way, spending on migration can be considered a source of human capital formation.
Expenditure on information: Many people acquire information about the demand for the product and ways to acquire efficient skills to improve productive efficiency. This enables the producer to satisfy the consumer's demand and optimise the productivity level. However, the actual potential productivity will be higher than the cost of acquiring information. Thus, expenditure on information of market condition and specialised skills contribute to human capital formation.

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