CBSE Class 11 Economics Human Capital Formation in India Assignment

Points to remember

* Human capital refers to the stock of skill, ability, experties, education and knowledge in a nation at a point of time.
* Human capital formation is the process of adding to the stock of human capital overtime.
* Sources of human capital formation

(i) Expanditure on education
(ii) Expanditure on health
(iii) On the job training
(iv) Study programmes for adults
(v) Migration and expanditure on information

* Role of human capital formation in economic growth

(i) Raises production
(ii) Change in emotional and physical envirnment of growth.
(iii) Improves quality of life.
(iv) Raises life expactancy
(v) Innovative skills.
(vi) Raises social justice and equality

* Problems facing human capital formation

(i) Rising population
(ii) High regional and gender inequality
(iii) Brain drain
(iv) Insufficient man power planning.
(v) Insufficient on the job training in agriculture
(vi) High poverty levels
(vii) Low acadamic standards

 * Importance and objectives of education

(i) Education produces good citizens.
(ii) Education facilitates use of resources in the country.
(iii) Develops science and technology.
(iv) Expands mental horizon of the people.
(v) Promotes cultural standard of the citizens.
(vi) Develops human personality.

 * Problems relating to development of education in India.

(i) Large number of illiteretes
(ii) Inadequate vocationalisation
(iii) Gender bios
(iv) Low rural access level
(v) Low government expanditure on education

 * Human capital formation in India

 (i) The seventh five year plan stressed upon the importance of human capital.
 (ii) In India, ministry of education at the centre and state level NCERT,
 (National Council of Educational Research and Training), UGC
 (University Grants commission) , AICTE (All India Council of Technical Education) Regulate the education sector.

(iii) In India, Ministry of Health at the union and the State level and ICMR (Indian Council of Medical Research) regulate the health sector.
(iv) World Bank states that India will become the knowledge economy.
Also if India uses its knowledge as much as Ireland does, than the per capita income will rise $ 3000 by the year 2020.
* Human capital formation raises the process of Economic Growth and economic growth raises the process of human capital formation

(i) Rise in human capital raise economic growth - Rise in Human capital
                  ↓
Modern attitude and outlook, better quality of life,
                  ↓
Higher life expectancy
                  ↓
More Efficiency
                  ↓
More Production
                 ↓
More economic growth
                 ↓
(ii) Rise in economic growth raises human capital formation -
Rise in Economic growth
                 ↓
Rise in per capita income
                 ↓
More investment in education and health
                ↓
Rise in human capital

• Education sector in India -

(i) Elementary education
(a) In 2005-06 primary and upper primary schools were 12.83 Lakh and gross enrolment ratio rose to 804 percent.
(b) Various policies are - Sarva Shiksha Abhiyan, Education Gurantee and alternative and innovative education, Mid Day Meal schome, District Primary education Programme, operation black Board and other progrmme.

(ii) Secondary Education -
(a) In 2005-06, 304 Universities, 12178 colleges enrolment of students 104.8 lakh
(b) Indira Gandhi National open University gives distance learning.
(c) UGC controls higher education.

(iv) Expansion of Technical Education -
1265 Engineering colleges, 1215 polytechnical institutes, 268 medical colleges, 38 agricultural universities, 390 community polytechnics.
(v) National Literacy mission was set up in 1988 its movement is “Education for all”.

MCQs

Question. Physical capital is
(A) Tangible
(B) Easily sold in the market
(C) (a) and (b)
(D) None of the above
Answer : D

Question. Economic growth requires ___________.
(A) Human capital
(B) Physical capital
(C) Both (a) and (b)
(D) Neither (a) nor (b)
Answer : C

Question. A person becomes a human resources when he is
(A) Willing to work
(B) Able to work
(C) in the age group 15-60 years
(D) All of these
Answer : D

Question. which of the following is not an example of physical capital?
(a) machinery
(b) raw material
(c) building
(d) education and knowledge in people.
Answer : D

Question. how much educational cess has been imposed by the government on all union taxes ?
(a) 1 percent
(b) 2percent
(c) 4 percent
(d) 5percent
Answer : B

Question. .............five-year plan recognised the importance of human capital?
(a) seventh
(b) third
(c) eight.
(d) sixth
Answer : A

Question. the objectives of the mid-day meal scheme is.......................?
(a) to boost universalisation of primary education
(b) to boost nutritional status of children in schools
(c) to increase inrollment, attendence and retention.
(d) to boost universalisation of uper primary level of education
Answer : C

Question. which one of the following is a reason for poor human capital formation in India?
(a) Brain drain
( b) insufficient resources
(c) high growth of population
(d) all of these
Answer : D

Question. which one of the following is a major sources of human capital formation in the country ?
(a) Expenditure on education
(b) Expenditure on infrastructure
(c) expenditure on defences
(d) expenditure on energy
Answer : A

Question. Indicators of educational achievement :
(A) Primary education
(B) Youth literacy rate
(C) Adult literacy rate
(D) All of these
Answer : D

Question. The major share of total education expenditure is taken by __________
(A) Elementary education
(B) Higher education
(C) Secondary education
(D) Technical education
Answer : A

Question. Indicator of growth of education sector
(A) Life expectancy rate
(B) Infant mortality rate
(C) Literacy rate
(D) None of these
Answer : C

Question. UNDP stands for :
(A) United Nations Developing Plan
(B) United National Development Programme
(C) United Nations Duration Programme
(D) United Nations Development Policy
Answer : B

Question. The stock of skill and expertise of nation at a point of time is called:
(A) Human capital
(B) Human development
(C) Human capital formation
(D) Physical capital
Answer : A

Question. Source of Human capital formation :
(A) Investment in education
(B) Investment in Health
(C) Investment in on-the-job training
(D) All of these
Answer : D

Question. Which of the following statements is true?
(A) Major share of education expenditure goes to higher education
(B) No education cess is imposed by the government on all union taxes
(C) Human development is bases on the idea that education and health are integral to human well- being
(D) Education and literacy can be used as synonyms of each other
Answer : C

ONE MARK QUESTIONS

Question. What is meant by human capital formation?
Answer: Human capital formation refers to the process of adding to the stock of human capital overtime.

Question. Define human capital.
Answer: Human capital is the stock of ‘skill and expertise’ of a nation at a point of time.

Question. What is investment in education?
Answer: Expanditure on education by the government is known as investment in education.

Question. Which five year plan recognised the importance of human capital?
Answer: The seventh five year plan puts in print the importance of human capital in economic growth.

Question. Why do we need to invest in human capital?
Answer: It is necessary to invest in human capital and to make use of the physical capital in an efficient manner and to develop man’s ability to increase productive capacity of a country.

Question. What is on -the -job training?
Answer: On-the-job training refers to the training provided to the workers by the firm to home their specialised skills. It makes tham more efficient and productive.

Question. What is the difference between literacy and education?
Answer: Education is a much wider concept than literacy literacy refers to the ability to read and write. Education includes three parameters primary, secondary and tertiery education all educated people and literate all literate people are not necessary educated.

Question. What do you mean by the term sources of human capital formation?
Answer: Source of human capital formation are the ways of adding to the existing stock of human capital.

Question. How does human capital formation improve quality of life?
Answer: Literate, healthy, skilled and trained people are an asset for an economy therefore it is the quality of population which means more economic growth.

Question. Name the movement started by national literacy mission.
Answer: The movement started by national literacy mission is ‘Education for all’.

Question. What is meant by training?
Answer: Training means to provide skill and knowledge for doing specific work. It increases efficiency.

CASE STUDY QUESTIONS

Read the given text and Answer the following questions

Both forms of capital formation are the outcomes of conscious investment decisions. The decision regarding investment in physical capital is taken on the basis of one’s knowledge in this regard. The ownership of physical capital is the outcome of the conscious decision of the owner the physical capital formation is mainly an economic and technical process.
Human capital formation takes place in one’s life when she/he is unable to decide whether it would maximize her/his earnings. Children are given different types of school education and health care facilities by their parents and society. Moreover, the human capital formation at this stage is dependent upon the already formed human capital at the school level. Human capital formation is partly a social process and partly a conscious decision of the possessor of the human capital.

Question. Which of the following does not correctly differentiate between the physical and human capital?
a) Human capital is intangible whereas physical capital is tangible.
b) Human capital can cope up with the changing technology whereas physical cannot.
c) Human capital generates both personal and societal benefits whereas physical capital generates only personal benefit.
d) Human capital gets obsolete with time whereas physical capital does not.
Answer: D

Question. In the context of the paragraph, it can be argued that human capital depreciates faster than the physical capital. The given statement is:
a) True
b) false
c) Partially true
d) can’t comment due to lack of proper estimation mechanism
Answer: B

Question. Machines and industrial tools are examples of _
a) Physical capital
b) Human capital
c) Both physical and human capital
d) Natural capital
Answer: A

Question. Investment in education by parents is the same as_______
a) Investment in intermediate goods by companies
b) Investment in CSR activity by companies
c) Investment in capital goods by companies
d) None of the above
Answer:  C

Read the following text carefully and Answer the questions that follow:

People spend to acquire information relating to the labour market and other markets like education and health. This information is necessary to make decisions with reference to investment in human capital and its efficient utilization. Thus, expenditure incurred for acquiring information relating to the labour market and other markets is also a source of human capital formation.

Question. Which of the following is the source of human capital formation in India?
a) Health
b) Migration
c) Acquiring information
d) All of these
Answer:  D

Question. Education provides-----
a) Private benefit
b) Social benefit
c) Both a) and b)
d) None of these
Answer:  C

Question. __ persons contribute more to the growth of an economy.
a) Educated
b) Healthy
c) Both a) and b)
d) None of these
Answer:  C

Question. Training given by a company to its employees is generally__________
a) Investment
b) Social wastage
c) Both a) and b)
d) None of these
Answer:  A

Read the following case study carefully and Answer the questions that follow.

Human capital, intangible collective resources possessed by individuals and groups within a given population. These resources include all the knowledge, talents, skills, abilities, experience, intelligence, training, judgment, and wisdom possessed individually and collectively, the cumulative total of which represents a form of wealth available to nations and organizations to accomplish their goals. The concept of human capital stems from the economic model of human resource capitalism, which emphasizes the relationship between improved productivity or performance and the need for continuous and long-term investments in the development of human resources. Investments in human capital are viewed as affecting national and global economic performance or, more narrowly, where investments in people are viewed as crucial to organization performance. For an organization, this model suggests that high productivity and performance depend on developing learning systems that reflect the commitment of an organization to its human resources. As a result, ongoing investments in training, skill development, and job enrichment engender a reciprocal commitment among members to organizational goals and objectives.

Question. The stock of skill and expertise of a nation at a point of time is called _________ Capital.
a) Real
b) Physical
c) Human
d) None of these
Answer:  C

Question. Which of the following is not a source of Human Capital Formation?
a) Education
b) Saving
c) Health
d) Information
Answer:  B

Question. __ is based on the idea that education and health are integral to human well-being.
a) Economic Development
b) Human Development
c) Social Growth
d) None of these
Answer:  B

Question. __________ is/are the reason for rural-urban migration in India.
a) Unemployment
b) Health facilities
c) Money
d) All of these
Answer:  A

Read the following case study carefully and Answer: the questions that follow.

In a knowledge economy, human intellectual is the key engine of economic enhancement. It is an economy where members acquire, create, disseminate and apply knowledge for facilitating economic and social development The World Bank has spoken of knowledge economies by associating it to a four - pillar framework that analyses the rationales of a human capital based economies:
• An educated and skilled labour force: The establishment of a strong knowledge-based economy required workers to have the ability to continuously learn and apply their skills to build and practice knowledge efficiently.
• A dense and modern information infrastructure: is of the easy access to the information and communication technology (ICT) resources in order to overcome the barrier of high transaction cost, and to facilitate the effectiveness in interacting, disseminating and processing the information and knowledge resources.
• An effective innovation system: a great level of innovation within firms, industries, and countries to keep up with the latest global technology and human intelligence so as to utilize it for the domestic economy
Institutional regime that supports incentives for entrepreneurship and the use of knowledge: An economy system should offer incentives to allow for better efficiency in mobilizing and allocating resources, together with encouraging entrepreneurship.

Question. What do you understand by knowledge economy?
Answer: An economy which apply knowledge (ICT) for facilitating economic and social development of a nation

Question. In its report the World Bank state that India should make a transition to the knowledge economy. Why?
Answer: India has a large number of skilled workers, and diversified science and technology infrastructure

Question. What are the two independent reports on Indian economy that have identified that India would grow faster due to its strength in human capital formation
Answer: Report by Deutsche bank and (global growth center’s) and report by World Bank (India and the knowledge economy)

(3/4 MARKS QUESTIONS AND ANSWERS)

Question. Why do we observe regional differences in educational attainment in India?
Answer: Regional differences in educational attainment in India are due to:
Regional Inequality in income
Differences in Expenditure by the government on development of education facilities.

Question. What factors contribute to human capital formation?
Or
What are the Sources of Human Capital Formation?
Answer:
➢ Expenditure on Education
➢ Expenditure on job Training
➢ Expenditure on Health
➢ Expenditure on Migration
➢ Expenditure on Information

Question. How is human development a broader term as compared to human capital?
Answer: Human capital is a narrow concept which treats human beings as a means to achieve an end which is higher productivity, failing which the investment is not considered to be productive.
Human development is a broader concept which considers human beings as ends in themselves. Human welfare can be achieved through investments in education and health. It considers welfare—a right of every individual irrespective of their contribution to labour productivity. Every individual has right to be literate and lead a healthy life.

Question. Education is considered an important input for the development of a nation. How?
Or
Examine the role of education in the economic development of a nation.
Answer: Expenditure on education is an important source of capital formation. Education is an important source of human capital formation, because:
It generates technical skills and creates a manpower which is suited for improving labour productivity. It, thus, results in sustained economic development.
It tends to bring down birth rate which, in turn, brings decline in population growth rate. It makes more resources available per person.
It results in social benefits since it spreads to others who may not be skilled. Thus, investment in education leads to higher returns in future.

Question. Establish the need for acquiring information relating to health and education expenditure for the effective utilization of human resources.
Answer: People need to have information on the cost and benefit of investment in health and education. When people know the benefits of their investment in these two areas, they make more expenditure. The result is more human capital formation.

Question. How does investment in human capital contribute to growth?
Answer: Role of Human Capital Formation in Economic Growth:
➢ Raises Production.
➢ Raises Efficiency and Productivity
➢ Brings Positive Changes in Outlook and Attitudes
➢ Improves Quality of Life
➢ Raises Life Expectancy
➢ Raises Social Justice

Question. ‘There is a downward trend in inequality world-wide with a rise in the average education levels. Comment.
Answer: This is true, because education makes everyone equal and they earn similar salaries.
It reduces inequalities of income worldwide.

Question. Explain how investment in education stimulates economic growth.
(Or)
Explain the role of education in the development of a country.
Answer: Education is an important source of human capital formation. Investment in education stimulates economic development in the following ways:
• Raises production. Knowledgeable and skilled workers can make better use of resources at their disposal. It will increase production in the economy. An educated and trained person can apply his knowledge and skill at farm, factory and office to increase production.
• Raises efficiency and productivity. Investment in education increases efficiency and productivity, and hence yields higher income to the people.
• Brings positive changes in outlook and attitudes. Knowledgeable and skilled people have modem
• Improves quality of life. Education improves quality of life as it provides better job, high income and improves health. It results in better standard of living.

Question. Bring out the need for on-the-job-training for a person.
Answer: Technical training adds to the capacity of the people to produce more.
Firms give on-the-job- training to enhance the productive skills of the workers so as to enable them to absorb new technologies and modem ideas. It can be given in two forms:
The workers may be trained in the firm itself under the assistance of a senior and experienced worker.
The workers may be sent off the firm campus for the training.

Question. Discuss the need for promoting women’s education in India.
Answer: Women Education Council has been set up to provide technical education to the women. It has set up many women polytechnics. It is essential to promote women’s education in India to:
• Improve women’s economic independence and their social status.
• Make a favorable impact on fertility rate and health care of women and children.

Question. Argue in favor of the need for different forms of government intervention in education and health sectors.
Answer: Government intervention in education and health sectors is necessary because of the following reasons:
• Education and health care services create both private as well as social benefits. Both private and public institutions are needed to provide these services and government must keep its control on them.
• Expenditure on education and health institutes are important for the growth of a nation. The private providers of education and health services need to be regulated by the government
• Ensure that private providers of these services adhere to the standard stipulated by the government and charge the correct price

Question. In your view, is it essential for the government to regulate the fee structure in education and health care institutions? If so, why?
Answer: Yes, government intervention is necessary in regulating the fee structure in education and health care institutions: because:
• to maintain uniformity
• to have accountability
• To help poorer people.

Question. List the benefits of education.
Answer: Following are the benefits of education:
(i) It gives a better social status and pride.
(ii) It enables wise decision-making.
(iii) It enhances social outlook and develops understanding to accept the changes taking place in society.
(iv) It stimulates innovations and facilitates adaptation of new technologies.

Question. Discuss the need for human capital.
Answer: The population of the nation takes charge of all economic activities such as production, distribution and consumption. Human capital, therefore, may be recognized as one of the production factors, which can generate additional values. An economy needs sufficient human capital in the form of educated, trained and competent people to function and accomplish its goals. As we move deeper into a knowledge-based economy that depends on information, knowledge and high-level skills, human capital becomes increasingly important.

Question. What are the different forms of health expenditure?
Answer: The different forms of health expenditure include expenditure on:
• Preventive medicine – vaccination eg: Covid Vaccine
• Curative medicine – health care practices that are used to treat patients with the intent of curing them, not just reducing their pain
• Social medicine – medical practices concerned with the role of social factors in the occurrence, prevention and treatment of disease
• Provision of clean drinking water
• Good sanitation

Question. Discuss the need for expenditure on information as a source of human capital.
Answer: People need to incur expenditure in order to acquire information related to equity markets, labour markets, education, health and other related markets. For instance, expenditure is incurred while collecting information related to education such form fees, transportation cost, consultancy fee, etc. Information plays an important role in making decisions regarding investments in human capital.
Moreover, expense is incurred for efficient utilization of the acquired stock of human capital. The money spent on obtaining information related to any kind of markets is a source of human capital formation.

Question. Higher income leads to high level of human capital.” Comment
Answer: Higher income leads to development of high level of human capital and vice versa. In other words, high level of human capital leads to growth of income. It is believed that even a large population, which is trained and educated, can become an asset in accelerating economic growth and ensuring social change in desired directions.
However, it is difficult to establish a relation of cause and effect from the growth of human capital to economic growth as the rate of growth of human capital in developing countries has been faster than the rate of growth of per capita real income.

Question. Discuss India’s potential as a knowledge economy.
Answer: India has the potential to become a leading knowledge-based economy. With its youth population and growing information and communication technology (ICT) industry, India can become a major global knowledge-based economy. However, there is a need for measures such as:
• Supportive laws
• Improved infrastructure
• Removal of barriers to trade and investment
• Up-skilling of labour force
• Higher spending in research and development
• Innovative financing for small businesses and enterprises
A shift to knowledge-based growth would help developing country like India. The Indian software industry has been showing an impressive record over the past decade

Question. Give an account of government’s expenditure on education.
Answer: During 1952-2012, education expenditure as percentage of total government expenditure increased from 7.92 to 11.7. As percentage of GDP, expenditure on education increased from 0.64% to 3.31% over the same period. However, the increase in education expenditure has not been uniform. The share of elementary education is the highest in the total education expenditure while that of higher/ tertiary education is the least.

Question. What initiatives have been taken by the government to provide equal access of education to all?
Answer: The following initiatives have been taken by the government to provide equal access of education. The Government of India enacted the ‘Right to Education Act’ in 2009 to make free education a fundamental right of all children in the age group of 6-14 years.
Government of India has started levying a 2 per cent ‘education cess on all Union taxes. The revenue earned from education has been earmarked for spending on elementary education. In addition, the government sanctions a large outlay for the promotion of higher education. New scheme for students’ loan for pursue higher education.

Question. ‘School dropouts are giving way to child labour.’ Discuss how this is a loss of human capital.
Answer: It is a reality that most families in our society is not able to provide standard education to their children due to many reasons such as poverty, unemployment etc. Poverty forces many children into work. Child labour includes work that deprives children of their childhood and is harmful to their mental and physical Development. School dropouts prevent children from getting equipped with literacy skills and give way to child labour. These children generally work at dhabas, houses and construction sites. Being illiterate further propels the poverty cycle and hence, the process of human capital formation remains.

 

6 MARKS QUESTIONS AND ANSWER

Question. Bring out the differences between human capital and human development.
Answer: Difference between Human Capital and Human Development
Human Capital
Human capital considers education and health as a means to increase labour productivity.
Human capital is a narrow concept which treats human beings as a means to achieve an end which is higher productivity, failing which the investment is not considered to be productive.
Human Development
Human development is based on the idea that education and health are integral to human well-being since only when people have the ability to read and apply their knowledge to derive maximum benefit they will be able to lead a long and healthy life.
Human development is a broader concept which considers human beings as ends in themselves. Human welfare can be achieved through investments in education and health. It considers welfare — a right of every individual irrespective of their contribution to labour productivity. Every individual has right to be literate and lead a healthy life

Question. Discuss the following ‘sources of human capital formation
(a) Health infrastructure
(b) Expenditure on migration.
Answer: 
• Health Infrastructure. Health is an important source of human capital formation. Preventive medicine (vaccination), curative medicine (medical intervention during illness), social medicine (spread of health literacy) and provision of clean drinking water and good sanitation are the various forms of health expenditure. Health expenditure directly increases the supply of healthy labour force and the productive capacity of a healthy person will be more than an unhealthy person. thus expenditure on health is a source of human capital
• Migration. People sometimes migrate from one place to the other in search of better job. It includes migration of people from rural areas to urban areas in India and migration of technical personnel from India to other countries of the world. Migration in both these cases involves cost of transport, higher cost of living in the migrated places and psychic costs of living in a strange socio-cultural set-up. The enhanced earnings in the new place outweigh the costs of migration. Expenditure on migration is also a source of capital formation.

Question. Trace the relationship between human capital and economic growth.
Answer: Human capital formation raises the process of economic growth and economic growth raises the process of human capital formation. There is a cause and effect relationship between human capital and economic growth. It is shown in the figure.

Question. What are the main problems of human capital formation in India?
Answer: Main problems of human capital formation in India are:
• Rising Population. Rapidly rising population adversely affects the quality of human capital formation in developing countries. It reduces per capita availability of existing facilities. A large population requires huge investment in education and health. This diverts the scarce money to production of human capital at the cost of physical capital.
• Long Term Process. The process of human development is a long term policy because skill formation takes time. The process which produces skilled manpower is thus slow.
• High Regional and Gender Inequality. Regional and gender inequality lowers the human development levels.
• Brain Drain. Migration of highly skilled labour termed as “Brain Drain” adversely affects the economic development.
• Insufficient on-the-job-training in agriculture. Agriculture sector is neglected where the workers are not given on-the-job training to absorb emerging new technologies.
• High Poverty Levels. A large proportion of the population lives below poverty line and do not have access to basic health and educational facilities. A large section of society cannot afford to get higher education or expensive medical treatment for major disease.

Question. What are the advantages of human capital formation?
Answer: The following are the advantages of human capital formation:
➢ It increases efficiency and income generating capacity of labour
➢ It improves technical knowledge.
➢ It enlarges the size of business.
➢ It increases the level of production.
➢ It changes social outlooks.
➢ It decreases cost of production.

Question. Differentiate between human capital and physical capital.
Answer: Following are the points of difference between human capital and physical capital:

Question. Explain the various sources of human capital.
Answer: Following are the sources of human capital:
(i) Education: Investment in education is considered as one of the source of human capital. Without education, human beings have only brutal manpower, in the form of physical labour. Investment in education gives human beings additional skills to do the same job.
It converts human beings into human capital, which enhances the labour productivity. This investment in education will ultimately increase the income of human beings in future.
(ii) Health: Health is another significant source of human capital. The health of a person affects human capital. A sick person, without access to medical facilities, is compelled to abstain from work and there is a loss of productivity. Expenditure on health directly increases the supply of healthy labour force and hence, a source of human capital formation. The various forms of health expenditure are:
• Preventive medicine such as vaccination
• Curative medicine such as interventions during illness
• Social medicine such as spread of health literacy
• Provision of clean drinking water
• Good sanitation
(iii) On-the-job Training: Firms incur expenditure on providing on-the-job training to their workers. Training imparts technical skills and know-how among the workers while working at the actual work site. On-the-job training helps in enhancing the productivity of the workers and facilitates better utilization of raw materials. It enables workers to absorb values and standards of an organization. The workers may be trained by either of the following two methods:
• Training within the firm under the supervision of a skilled worker
• Off-campus training
(iv) Migration: People migrate in search of jobs that fetch them higher salaries than what they may get in their native places. For instance, engineers and doctors migrate to other countries for higher salaries that they may get in such countries.
Migration involves transportation cost, higher cost of living in the migrated place and psychic cost of living in an unknown socio-culture setup. However, the increased earnings at the new place outweigh the cost of migration. Hence, expenditure on migration is also a source of human capital formation.
(v) Labour Market Information: People need to incur expenditure in order to acquire information related to equity markets, labour markets, education, health and other related markets. For instance, expenditure is incurred while collecting information related to education such form fees, transportation cost, consultancy fee, etc.
Information plays an important role in making decisions regarding investments in human capital. Moreover, expense is incurred for efficient utilization of the acquired stock of human capital. The money spent on obtaining information related to any kind of markets is a source of human capital formation.

Question. Explain the role of human capital formation in economic development.
Answer: The role of human capital formation in economic development is discussed below:
(i) Increase in the Efficiency of Labour: Investment in human capital through education, health, training, etc. increases the efficiency of labour. This, in turn, helps in achieving the path of economic development.
(ii) Enlarged Size of Business: The size of business can be enlarged by efficient entrepreneurs and innovators. An entrepreneur becomes efficient by investment in human capital and this efficiency ultimately leads to economic development.
(iii) Increase in Production: Increase in the total output produced by a country leads to economic development. Human capital formation produces able and efficient persons who use their knowledge, skills and efficiency to increase the production.
(iv) Change in Social Outlook: Spread of education and health facilities enhances social outlook and develops understanding to accept the changes taking place in society. These positive changes also contribute significantly towards economic development.
(v) Reduced Production Cost: Reduction in the production cost is essential for the economic development. Human capital formation helps to decrease the production cost.

Question. Briefly describe the two reports that point out the fact that further human capital formation in India will move its economy to a higher growth level.
Answer: In recent times, two independent reports on the Indian economy have identified that India would grow faster due to its strength in human capital formation.
(i) A report – ‘Global Growth Centers’- published by Deutsche Bank, A German bank identified that India will emerge as one among four major growth centers in the world by the year 2020.
The report states the view that increase in human capital are crucial to achieving increases in GDP and hence, it states that between 2005 and 2020 we expect a 40 per cent rise in the average years of education in India.
(ii) World Bank’s in its recent report, ‘India and the Knowledge Economy Leveraging Strengths and Opportunities’, states that India should make a transition to the knowledge economy.
According to the report, Indian economy has all the main ingredients required for making this transition such as, a critical mass of skilled workers, a well-functioning democracy and a diversified science and technology infrastructure. Moreover, it is expected that the per capita income of India will increase from approximately US $ 1000 in 2002 to US $ 3000 in 2020 if it uses its knowledge as much as Ireland does.

Question. What are the objectives and functions of NCERT, UGC, AICTE and ICMR?
Answer: The objectives and functions of different organizations are as below:
(i) National Council of Educational Research and Training (NCERT): NCERT is an autonomous organization set up in 1961 by the Government of India to assist and advise the Central and State Governments on policies and programmes for qualitative improvement in school education.
(ii) University Grants Commission (UGC): The UGC, set up in 1953, has the unique distinction of ‘being the only grant-giving agency in the country, which has been vested with two responsibilities:
providing funds and coordinating, determining and maintaining standards in institutions of higher education.
(iii) All India Council for Technical Education (AICTE): AICTE was set-up in November 1945 as a national level apex advisory body to conduct survey on the facilities on technical education and to promote development in the country in a coordinated and integrated manner.
(iv) Indian Council of Medical Research (ICMR): The Indian Research Fund Association (IRFA), re-designated as ICMR in 1949 in New Delhi, is the apex body in India for the formulation, coordination and promotion of biomedical research. It is one of the oldest medical research bodies in the world.

Question. Suggest measures to reduce problems of human capital formation.
Answer: The following measures may be adopted to reduce the problems of human capital formation in India:
(i) More Emphasis on Technical Education: Technical education makes a person income earner soon. On the other hand, college or university education is increasing the number of unemployed; therefore, more emphasis may be given on technical education to reduce the problem of human capital formation.
(ii) Need for Government-run Programmes in Education and Health Sector: For the removal of different problems of human capital formation, there is a need for the different forms of. Government intervention in the education and health sector. In this regard, government has started many programmes in education sector such as Sarva Shiksha Abhiyan (SSA), Mid Meal Scheme, Kasturba Gandhi Balika Vidyalaya (KGBV), Prarambhik Shiksha Kosh (PSK), etc. The main objective of these programmes is to make universal access education to all. In the health sector government has also started many disease control programmes.
(iii) Regulation of Fees Structure in Education and Health Care Institutions: it is very essential for the government to regulate the fees structure in education and health care institutions.
(iv) Change in Educational System: For the success of human capital formation, basic changes and improvements in educational system are essential. Technical and secondary education should be compulsory and more focus on higher education.
(v) Compulsory Secondary Education: For the success of human capital formation, secondary education should be compulsory to all, which will definitely help in increasing the productivity and efficiency of the people
(vi) Proper Motivation. For the success of human capital formation programmes, proper motivation is required. This will help the people to adopt modern techniques of production.
To conclude, for the development of any country, human capital formation is very important. Government of India is also investing a lot in the field of education and health for human capital formation.