Check sibling questions

Human Capital - Teachoo.png

  • In this chapter, People as Resource , we’ll try to understand how the population can be an asset for the economy rather than a liability .
  • When investment is made in education , training and medical care population becomes human capital .
  • Human capital is the stock of skill and productive knowledge embodied in them.
  • 'People as Resource' is a way of referring to a country’s working people in terms of their existing productive skills and abilities .
  • Looking at the population from this productive aspect emphasises its ability to contribute to the creation of the Gross National Product .
  • Like other resources population also is a resource — a ' human resource ' .
  • This is the positive side of a large population that is often overlooked when we look only at the negative side , considering only the problems of providing the population with food , education and access to health facilities .
  • When the existing 'human resource' is further developed by becoming more educated and healthy , we call it ' human capital formation which adds to the productive power of the country just like 'physical capital formation’ .
  • Investment in human capital (through education, training, and medical care) yields a return just like an investment in physical capital .
  • This can be seen directly in the form of higher incomes earned because of the higher productivity of the more educated or the better-trained persons , as well as the higher productivity of healthier people.
  • Not only do the more educated and the healthier people gain through higher incomes , but society also gains in other indirect ways because the advantages of a more educated or healthier population spread to those also who themselves were not directly educated or given health care .
  • Human capital is in one way superior to other resources like land and physical capital: human resources can make use of land and capital whereas land and capital cannot become useful on their own.
  • For many decades in India , a large population has been considered a liability rather than an asset .
  • But a large population need not be a burden for the economy . It can be turned into a productive asset by investment in human capital .
  • For example, by spending resources on education and health for all, training of industrial and agricultural workers in the use of modern technology , useful scientific research and so on.

Stories of Vilas and Sakal - teachoo.png

  • The two stories of Sakal and Vilas below illustrate how people can try to become a more productive resource:
  • Sakal and Vilas live in the same village Semapur .

Story of Sakal :

  • Sakal was a twelve-year-old boy.
  • His mother Sheela looked after the domestic chores
  • His father Buta Chaudhary worked in an agricultural field .
  • Sakal helped his mother with domestic chores and also looked after his younger brother Jeetu and sister Seetu.
  • His uncle Shyam had passed the matriculation examination , but, was sitting idle in the house as he had no job.
  • Sakal’s father(Buta) and mother(Sheela) were eager to teach Sakal. They forced him to join the village school which he soon joined.
  • He started studying and completed his higher secondary examination . His father persuaded him to continue his studies and raised a loan for Sakal to study a vocational course in computers.
  • Sakal was interested in studies from the beginning. With great vigour and enthusiasm , he completed his course.
  • After some time he got a job in a private firm . He even designed a new kind of software . This software increased the sale of the firm.
  • His boss acknowledged his services and rewarded him with a promotion .

Story of Vilas :

  • Vilas was an eleven-year-old boy residing in the same village as Sakal.
  • Vilas’s father Mahesh was a fisherman who passed away when he was only two years old.
  • His mother Geeta sold fish to earn money to feed the family .
  • She bought fish from the landowner’s pond and sold it in the nearby mandi
  • She could earn only Rs 150 a day by selling fish .
  • Vilas became a patient with arthritis.
  • His mother could not afford to take him to the doctor .
  • He could not go to school either because he was not interested in his studies .
  • He helped his mother with cooking and also looked after his younger brother Mohan.
  • After some time his mother fell sick and there was no one to look after her. There was no one in the family to support them.
  • Vilas , too, was forced to sell fish in the same village and like his mother earned only a meagre income.


  • In the two case studies, we saw Sakal went to school and Vilas did not go.  
  • Sakal was physically strong and healthy and there was no need for him to visit the doctor frequently.
  • On the other hand, Vilas was a patient with arthritis . He lacked the means to visit the doctor .
  • Sakal acquired a degree in computer programming and got a job in a private firm while Vilas continued with the same work as his mother. He earned a meagre income like his mother to support his family.
  • In the case of Sakal , several years of education added to the quality of labour. This enhanced his total productivity and adds to the growth of the economy . This in turn pays an individual through salary or in some other form of his choice .
  • But in the case of Vilas , there was no education or health care in the early part of his life. He spends his life selling fish like his mother. Henceforth, he draws the same salary as an unskilled labourer as his mother.
  • Investment in human resources can give high rates of return in future. This investment in people is the same as investment in land and capital .
  • A child with investments made in her education and health can yield a high return in future in the form of higher earnings and greater contribution to society .
  • Educated parents are found to invest more heavily in the education of their children because they have realised the importance of education for themselves .
  • They are also conscious of proper nutrition and hygiene and accordingly look after their children’s needs for education at school and good health
  • A virtuous cycle is, thus, created in this case.
  • In contrast, a vicious cycle may be created by disadvantaged parents , who themselves are uneducated and lacking in hygiene , who keep their children in a similarly disadvantaged state .
  • Countries , like Japan , have invested in human resources . They did not have any natural resources but still, these countries are developed/rich . They import the natural resource needed in their country.
  • They have invested in people , especially in the field of education and health . These people have made efficient use of other resources , like land and capital . Efficiency and the technology evolved by people have made these countries rich/developed .



Learn in your speed, with individual attention - Teachoo Maths 1-on-1 Class

Ask a doubt
Davneet Singh's photo - Co-founder, Teachoo

Made by

Davneet Singh

Davneet Singh has done his B.Tech from Indian Institute of Technology, Kanpur. He has been teaching from the past 13 years. He provides courses for Maths, Science, Social Science, Physics, Chemistry, Computer Science at Teachoo.