There are 5 main Sources of Human Capital

Sources of Human Capital - Teachoo.JPG

1 Investment in Education

People spend money on Education of Children

This is to increase their skills so that they can earn good income in future in jobs or business

Investment in Education includes money spent on school, college fees, training various skill development courses etc

Investment in Education - Teachoo.JPG

2 Health

A healthy person can of course work better than a sick person

Hence,it is necessary to provide sick person with proper medical facilties, so that there is no loss of productivity

Expenditure on health includes following

Preventive Medicine (Providing Vaccines to people)

Curative Medicine (Curing Diseases through Medical Procedure)

Social Medicine (Supply of Health/Literacy)

Providing Clean Drinking Water

All these increase supply of healthy workforce

INVESTMENT IN HEALTH - Teachoo.JPG

Different Types of Investment in Health - Teachoo.JPG

3 Migration

People migrate from Rural areas to Urban areas because of higher employment opportunities in urban areas

Similarly, people migrate to countries like USA in search of higher income

However, there is cost of migration also in form of cost of transport, higher cost of living, psychological cost of living away from home

Since benefits of higher earning due to migration is more than cost of migration, it is also a source of capital formation

What is Migration - Teachoo.JPG

Benefits and Drawbacks of Migration - Teachoo.JPG

4 Information

People spend to obtain information about different labour market, job opportunities etc

This is obtained through internet, magazines, journals etc

Expenditure on aquiring these information is also a source of capital formation

Information- Source of Human Capital - Teachoo.JPG

 

 

5 On the Job Training

When a new employee is hired,he is first trained

They can be trained under supervision of skilled worker or they may be sent for off campus training

It is a source of human capital as leads to increase in skills of employee and increases their productivity

What is On Job Training - Teachoo.JPG

Summary-On Job Training - Teachoo.JPG

 

Reasons for Poor Human Capital formation in India

1 Insufficient resources

The resources allocated for development of human capital are much less than required

 

2 Serious Inefficiencies

Society's resources are wasted massively as human capital are either not utlised or underutilised

 

3 Brain Drain

People of the country shift to other countires in search of better opportunities and handsome salaries

This leads to loss of high quality human capital for the country

 

4 High growth of population

Population of the country has been increasing, which reduces per capita availability of resources

 

5 Several Imbalances

Major resources available for education are spent in tertiary education, which creates imbalance in primary and secondary education

 

 

6 Lack of proper manpower planning

There is imbalance between demand and supply of human capital, especially for high skilled personnel

This imbalance leads to a lot of wastage

 

7 Weak science and technology

The technological development and the performance in the field of science have not been satisfactory.

 

Reasons for Poor Human Capital formation in India  - Teachoo.JPG

Reasons for Poor Human Capital formation in India  2 - Teachoo.JPG

 

 

 

 

 

 

 

 

 

 

NCERT Questions

Q1

What are the two major sources of human capital in a country?

View Answer

 

Q6

What factors contribute to human capital formation?

View Answer

 

Q9

Discuss the following as a source of human capital formation

(i) Health infrastructure (ii) Expenditure on migration.

View Answer

 

Q10

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

View Answer

 

 

Q12

‘There is a downward trend in inequality world-wide with a rise in the average education levels’. Comment.

View Answer

 

Q15

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

View Answer

 

Q19

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

View Answer

 

MCQ Other Books

Q1

In the following questions, select the correct answers:

Which one of the following is a reason for poor human capital formation in India?

A Brain Drain

B Low growth of population

C Insufficient resources

D All of these

View Answer

 

Q2

Which of the following is a source of human capital formation?

A Expenditure on infrastructure

B Expenditure on education

C Expenditure on on-the-job training

D All of these

View Answer

 

Q3

A man remains absent from work due to illness.

It will affect:

A Safety of work

B Salary/Income

C Productivity

D All of the above

View Answer

 

Q4

Which of the following statements is true with respect to education in India?

A An essential element of human resource development.

B All the Indians are highly educated.

C There is no problem of drop-outs from school.

D The examination system is the best in the world.

View Answer

 

 

  1. Class 12 NCERT
  2. Indian Economic Development

Transcript

Sources of Human Capital Investment In Education People spend money on Education of their children to increase their skills Health A healthy person performs better than sick person Hence investment in health is required Migration People migrate from one place to another to get better job opportunities Information People use information from various sources like Internet, Magazines to get better job opportunities On Job Training Companies train their employees so that they perform better in job Investment in Education Schools Colleges Training Centres All these Provide Knowledge and Skills to students Make them Job Ready Increase Human Capital INVESTMENT IN HEALTH Who Contributes More to Economic Growth Healthy Person He can contribute More to economic growth as he has higher productivity Sick person He is sick and weak So cant give his full productivity At work Therefore Investment in Health For Economic Growth How to Keep a Person Healthy? Get them Vaccinated to Prevent Disease Get them Vaccinated to Prevent Disease Treat their disease Make them Aware about health issues Provide Clean Drinking Water Different Types of Investment in Health Investment in Preventive Medicine It means measures taken for disease prevention like vaccination) Investment in Curative Medicine (it means measures taken to cure disease with surgery,mdicine etc) Investment in Social Medicine (it means measures taken to raise awareness about different health Issues) Investment in Basic Facilities (it means providing facilities like clean drinking water,garbage removal to reduce risk of different diseases What is Migration? It means movement of People from one place to another Different Types of Migration Example 1 - Internal Migration Movement of People Villages (Rural Area) Cities (Urban Area) Example 2 - External Migration Movement of People India USA Villagers Migrating to Cities in search of Work Indians Migrating to Canada in search of better living standard Benefits and Drawbacks of Migration Benefits Better Employment Opportunities Salary In India Rs 15000 Salary in Canada 2000 $ (Rs 120000) Better Living Condition Home in India Home in Canada If Benefits are more than Cost, it is a Source of Human Capital Drawbacks Cost of Movement Cost of Flight tickets Cost of VISA Higher Cost of Living Grocery in India Rs 5000 pm Grocery in Canada 1000 $=Rs 60000 Psychological Cost Information- Source of Human Capital How do People get to know about different jobs? Internet Newspapers Placement Agency Career Councillor Expenditure on all these to acquire information about labour market is Investment in Human Capital What is On Job Training? Example Suppose in Campus Placement you get your first job in a Company as an Accounts Executive Do you know what work to do on first day? No,(We do not have required skills) How will we get Skills? We will get training from company Training from Senior how to do work or Training Session Organized by Company Will you get Salary during this Period? Yes Who will pay for training? Company Summary-On Job Training On Job Training During Job It means Training to Employee during job Different Types of On Job Training Training from Senior during job Training session organized by company Why is this training done? To increase Employee Skills To increase its productivity so that employees perform better in job Reasons for Poor Human Capital formation in India Lack of Govt Spending Insufficient resources The resources allocated for development of human capital are less than requirements Govt spending on Education is less than Sufficient Increasing Population of India High Population of India Education Budget =100000 Crore India’s Population =100 Crore Education Budget per person= 100000/100= Rs 1000(Very less) Population of the country has been increasing, which reduces per capita availability of resources Skilled People moving out of india Brain Drain from India People of the country shift to other countries in search of better opportunities. This leads to loss of high-quality human capital for the country Reasons for Poor Human Capital formation in India Govt College Lack of Creativity and Reseach Weak science and technology The technological development and performance in the field of science have not been satisfactory. No significant new inventions made in India As Students doing Rote Learning No Jobs Serious Inefficiencies & Lack of Manpower Planning There is large scale unemployment in India Society's resources are wasted massively as Human capital are either not utlised or underutilized

About the Author

CA Maninder Singh's photo - Expert in Practical Accounts, Taxation and Efiling
CA Maninder Singh
CA Maninder Singh is a Chartered Accountant for the past 10 years. He also provides Accounts Tax GST Training in Delhi and Pune.