Sources of Human Capital

 Introduction


Human capital refers to the stock of health, knowledge, motivation, physical capital and skills of an individual that is used to produce economic value. Educationally qualified, healthy, trained and skilled workers engaged in the process of production are referred to as human capital.


There are many differences between human capital & physical capital: physical capital refers to the tangible assets which are created by humans and are used in production.

Human capital refers to the intangible qualities like knowledge, skills learned and acquired by humans, which make them more productive.


Human capital formation refers to the process of improvement in the knowledge, skill, ability and physical capacity of the people. In other words, it refers to the process of improving or developing the existing ‘human resource’. It adds to the productive capacity of a country. The main sources of human capital formation are:

    Expenditure on education

    Expenditure on health

    On-the-job-training

    Migration and

    Expenditure on information


Human capital formation is of immense importance in promoting the growth in an economy. It plays an important role in economic growth by:

    Raising productivity

    Bringing positive changes in outlook and attitudes of people,

    Raising life expectancy,

    Raising social justice,

    Facilitating better usage of technology, etc.


The government plays the important role of facilitating human capital formation. There are various regulatory bodies of both education and health sector in India. The various regulatory bodies of education sector in India are:

    Ministries of education at the Union and State level

    All India Council of Technical Education (AICTE)

The regulatory bodies of health sector in India are:

    Ministries of health at the union and state level and

    Indian Council for Medical Research (ICMR)


The World Bank in its report stated that owing to its growing IT sector India has the capability of becoming a knowledge economy. Similarly, the Deutsche Bank has stated that India will be one of the four major centres of growth in future.

Despite the growth of the health sector there are problems of human capital formation in India. They are:

    Rising population

    Long term process

    High regional and gender inequality

    Inefficient on-job training

    Brain drain

    High poverty levels




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  • Q1

    India is a federal country with _______ governance.

    Marks:1
    Answer:

    Two Tier

    Explanation:

    India is a federal country with three tier governance.
    (i) Central Government
    (ii) State Government
    (iii) Local Government (Panchayat, Municipalities, etc.)

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  • Q2

    ___________ was awarded Nobel Prize in Economic Sciences in 1979.

    Marks:1
    Answer:

    Theodore W. Schultz

    Explanation:

    Theodore W. Schultz was awarded Nobel Prize in Economic Sciences in 1979 for his pioneering research in economic development with particular consideration for the problem of developing countries.

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  • Q3

    Health and education are known as ____________.

    Marks:1
    Answer:

    Social infrastructure

    Explanation:

    Health and education are known as social infrastructure. Education and health not only generate human resources but also contribute directly to the well-being of the people.

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  • Q4

    Reproducible or man-made means of production which help in production of other goods in future is known as ____________.

    Marks:1
    Answer:

    Physical capital

    Explanation:

    Reproducible or man-made means of production which help in production of other goods in future is known as Physical capital.

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  • Q5

    ___________ refers to the stock of knowledge, ability, skill and physical capacity of the people.

    Marks:1
    Answer:

    Human capital

    Explanation:

    Human capital refers to the stock of knowledge, ability, skill and physical capacity of the people at a point of time which helps the human factor to produce more.

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