Human Capital Formation in India

How people’s skills and health become human capital: its sources, how it differs from physical capital and from human development, and India’s education and health indicators.

Key ideas

Human capital is the stock of skill and expertise of a nation; it is built through education, health, on-the-job training, migration and information.
Physical capital is tangible and can be sold or separated from its owner; human capital lives in the person and also benefits society.
Human capital treats education and health as means to higher productivity; human development treats them as ends in themselves.
Healthier, better-educated workers produce more and adopt new technology, and growth in turn funds more education and health.
Health spending includes preventive medicine (vaccination), curative medicine and social medicine (health awareness).
NCERT works on school education, UGC on universities, AICTE on technical education and ICMR on medical research.
The RTE Act (2009) makes education free and compulsory for children aged 6–14.

Remember

Infant mortality (per 1,000 live births)	146 in 1951 → 28 in 2018–22
Literacy rate	about 17% in 1951 → 78% in 2018–22
Life expectancy	about 37 years in 1951 → 68.6 (men), 71.4 (women) in 2018–22
Fewer deaths from a lower rate	births ÷ 1,000 × (old rate − new rate)
Months to recover training cost	cost ÷ extra earning per month
Education spending	desired about 6% of GDP

Watch out

Saying human capital can be sold like a machine.
Forgetting to divide by 1,000 when using a rate “per 1,000”.
Treating human capital and human development as the same idea.

Worked example

A student spends ₹100,000 a year on a 1-year course. With it, the student expects to earn ₹17,000 more each month for 31 years. (a) What does the course cost in all? (b) What is the total extra earning? (c) Is the investment worth it in money terms? (d) Name one benefit that money does not measure.

Working: 100,000 × 1; 17,000 × 12 × 31

Answer: (a) ₹100,000 (b) ₹6,324,000 (c) yes (d) e.g. better health, confidence and a fuller life (also benefits to society)