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Human Capital Formation In India
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Indian Economic Development
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Economics
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How does investment in human capital contribute to growth?
Investment in human capital contributes to economic growth a lot because the labour skill of an educated person is more than that of an uneducated person and he/she generates more income. Economic growth means the increase in the real National Income of a country, hence healthy persons could provide uninterrupted labour supply for a longer period of time. So, investment in both education and health along with many other factors like on the job training, job market information and migration to increase an individual's income generating capacity. Empirical evidences have shown that increase in human capital causes economic growth at a much faster rate, but, unfortunately the growth in human capital and economic development does not result in the growth of per capita real income at the same speed as in the economic growth.
India recognised the importance of human capital in economic growth long ago. The Seventh Five Year Plan says - Human resources development has necessarily to be assigned a key role in any development strategy, particularly in a country with a large population. Trained and education on sound lines, a large population can itself become an asset in accelerating economic growth and in ensuring social change in desired directions.
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Explain how investment in education stimulates economic growth.
Education prepares people for the ever-changing situations by developing values, aptitudes, knowledge and skills. It provides capacity and flexibility to the people and enables them to contribute in the economic development of the country. General education raises the level of understanding of the people and technical education makes siginificant contribution in raising efficiency and productivity by encouraging science and technology in the country. Medical education improves the health of the people. Education generates consciousness towards nation, society and development. It promotes scientific outlook. Human beings without education be only a unskilled manpower. Investment in education gives them additional skills to do the same job more efficiently or variety of other jobs. Education converts human beings into human capital. The human capital represents the enhanced labour productivity which is an acquired ability and an outcome of deliberate investment decisions.
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'There is a downward trend in inequality world-wide with a rise in the average education levels'. Comment.
This is rightly said that there is downward trend in inequality world-wide with a rise in the average education levels because education gives confidence among the masses to perform any work. It enables the person to work for a longer period. It helps in improving the productivity and the morale of the worker. It facilitates the person to differentiate between the better and best education and paves the way for healthy and educated generation (human capital) for the future which in turn leads to economic development. Education helps in increasing standard of living of people, thereby, helps in increasing the real per capita income.
Hence it is absolute truth that growth and investment in education result in reducing the inequilities not within the boundaries of a nation abut also across the borders.
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What are the main problems of human capital formation in India?
In a developing country like India, a large section of the population is living below the poverty line. Many of them cannot afford to access to basic education and health care facilities. They cannot afford super speciality health care and higher education. Hence low level of education and health are the main problems of human capital formation. When basic education and health care is considered as a right of the citizens, it is the duty of the government to provide these facilities. Per capita expenditure on health and primary education is not sufficient. At least 6 percent of the GDP should be spent on education, but the current level is only 4 percent which has been quite inadequate
Inspite of a provision in our constitution to provide free and compulsory education up to the age of 14, progress in this sector is far short of the target. The enrolment ratio in schools is not satisfactory. There is shortage of qualified teachers in the schools. In elementary education the dropout rate is very high.
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Trace the relationship between human capital and economic growth.
Relationship between human capital and economic growth : Human capital refers to the stock of skill, ability, expertise, education and knowledge in a nation at a point of time and Economic Growth means the continuous increase in real national income of a country. Human capital formation raises the process of economic growth and economic growth raises the process of human capital formation. Thus there is cause and effect relationship between human capital and economic growth. It has been shown below :
Rise in human capital is the cause of more economic growth : Rise in human capital brings positive changes in outlook and attitudes in human being. It improves quality of life and raises life expectancy. Modern attitude and outlook, better quality of life and higher life expectancy makes workers more efficient and productive resulting into the increase in real national income of a country (i.e. Economic Growth).
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Examine the role of education in the economic development of a nation.
In economic development, growth in education and health are the important parameters.
Investment in education converts human beings into human capital that provides the way for increase in future productivity. The spread of education ensures simultaneous growth in economic development, equitable distribution of resources and an even growth of every sector of the society. Two independent reports on the
Indian economy have proved that investment in education leads to higher human capital formation and thus, consequent increase in economic development.
1.Deutsche Bank, a German Bank, in its report on Global Growth Centre's (Published on 1.7.05) identified that India will emerge as one among four major growth centres in the world by the year 2020. The reason behind this success in increasing awareness towards education (Primarily elementary education) and growth in human capital.
2.World Bank, in its recent report India and the knowledge Economy - leveraging Strengths and Opportunities states that India should make a transition to the knowledge economy and it should use its knowledge as much as Ireland does (as Ireland uses its knowledge very effectively), the per capita income of India will increase from a little over US $ 1000 in 2002 to US $ 3000 in 2020. It further states that the Indian economy has all the key ingredients for making this transition as she has a critical mass of skilled workers, a well functioning democracy and a diversified science and technology infrastructure.
This clearly shows the role of education in the economic development of a nation.
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