Importance, Problems & Human Development
Class 12 Indian Economic Development — Why HCF Matters, Its Challenges, and the Human Development Perspective
Importance of Human Capital Formation
Human capital formation plays a vital role in the economic development of a nation through seven key contributions.
Effective Use of Physical Capital
Human skill and effort are needed to create and utilise physical capital effectively
Higher Productivity and Production
Technical skills acquired through education and training raise productivity and quality of output
Inventions, Innovations and Technological Improvement
Education enables scientific understanding, facilitating inventions and adaptation to new technologies
Modernisation of Attitudes
Investment in human capital changes mental outlook and creates a will for development
Increases Life Expectancy
Better health facilities and nutrition enable people to live longer, healthier lives
Improves Quality of Life
Quality of population depends on education, health, and skill — HCF transforms lives beyond income
Control of Population Growth
Educated persons have smaller families — the spread of education helps control population growth
Problems of Human Capital Formation
India faces seven major challenges in building its human capital. Click each cause below to read the explanation.
India's Demographic Profile
25%
Children & Young Adolescents
0-14 Years
26%
Young Adults
10-24 Years
68%
Working-Age Population
15-64 Years
7%
Older Adults
65+ Years
Human Capital vs Human Development
| Aspect | Human Capital | Human Development |
|---|---|---|
| Perspective | Considers education and health as a means to increase labour productivity — a means to an end | Considers education and health as integral to human well-being — ends in themselves |
| Scope | Narrow — any investment in education/health is unproductive if it does not enhance output | Broader — human welfare should increase through education and health even without higher labour productivity |
Human Development Perspective
Key Takeaways
Key Takeaways
- HCF is important for effective use of physical capital, higher productivity, innovations, modernisation of attitudes, longer life expectancy, better quality of life, and population control
- Seven major problems plague HCF in India: insufficient resources, inefficiencies, brain drain, high population growth, educational imbalances, lack of manpower planning, and weak S&T
- Brain drain — the loss of high-calibre professionals to other countries — imposes a heavy cost on a developing economy
- Human Capital views education and health as a means to productivity; Human Development views them as ends in themselves — every person has a right to education and healthcare
- India's demographic profile (68% working-age population) is an opportunity — but only if HCF problems are addressed effectively