ECONOMICS

XII-(2023-24)

PART -1
VIDEO
NOTES
 NOTES
HUMAN CAPITAL FORMATION

HUMAN CAPITAL

Human Capital is an intangible asset or

quality not listed on a Company’s
balance sheet.

It can be classified as the economic

value of worker’s experience and skills.
This includes assets like education,
training, intelligence, skills, health, and
other things employers value such as
loyalty and punctuality.

S.NO PHYSICAL CAPITAL HUMAN CAPITAL

Intangible, built in the

Tangible can be body and mind of its
1 sold in the market owner

Can be separated Inseparable can’t be

2 sold anywhere but only
from the owner
services can be sold

3 Mobile between Hardly mobile

countries if trade restricted by
restriction followed nationality

Can be built only It depends on person

4 choice whether he/she
through imports
wants to raise the
and creates only
earnings or not. It
private benefits
creates both private
and social benefits.
 SOURCES OF HUMAN
CAPITAL FORMATION

CHANGE IN CHANGE IN CHANGE IN

EXPENDITURE ON EXPENDITURE ON THE JOB
ROLE OF RBI ROLE OF RBI ROLE OF RBI
EDUCATION ON HEALTH TRAINING

CHANGE IN
EXPENDITURE CHANGE IN
EXPENDITURE
ON RBI
ROLE OF ON RBI
ROLE OF
MIGRATION INFORMATION

EXPENDITURE ON EXPENDITURE ON
HEALTH EDUCATION

Expenditure on Health: Poor Expenditure on Education: One of

countries tends to be unhealthy, the most important sources of Human
Capital formation is investment done
and unhealthy countries tend to be
in education. Education transforms a
poor. health is a kind of human person to live a better life. Provide
capital as well as an input education to every children is the
producing other forms of human primary responsibility of their parents,
capital. A worker who is not well society and the government. By
will certainly affect the productivity. getting education people can secure
Various forms of health their future and can earn more.
expenditures are, making available Education helps them to grow and
clean and safe drinking, preventive, they help is the process of
curative medicine and social development of the economy.
medicine etc. Expenditure on Educated people are the asset of the
education and health is important nation where as uneducated people
to build a strong economy. it also are liability of the nation. Government
leads to increase in productivity. should expand the education system
GDP of economy also increases. by improving the quality of education
and preparing high budget for
education.
 → Preventive medicines known as vaccination.
→ Curative medicines are medical intervention
during illness.

→ Social medicines, i.e. spread of health literacy.

ON THE JOB TRAINING

On the Job Training: Expenditure regarding on-the-job

training is a source of human capital formation it
enhance the quality of labour and productivity increases.
Firm spend huge amounts on giving on-the-job training
to their workers. It may be in different forms like a worker
may be trained in the firm itself or under the supervision
of a skilled worker or can be sent for off campus training
after spend a large amount on training firm insist that
the workers should work for a specific period of time so
that firm can recover the benefits of the enhanced
productivity owing to the training. It also increase the
GDP and National Income of the economy.
EXPENDITURE ON MIGRATION

Expenditure on Migration: People migrate

from one place to another place to find
better jobs in order to gain the advantage of
location and earn higher salaries. Migration
from a rural area to urban area is prime cost.
Rural areas don’t have sectors to provide
good employment, so people migrate, due to
lack of infrastructure in rural area standard
of living of people may not rise. Hence they
move to urban area, whereas technically
qualified professionals (like engineers,
doctors, scientist, etc.) migrate from one
country to another. Migration involves cost:
(i) Cost transport from one place to the
other.
(ii) Cost of living in different social
environment. But the gains of migration
(higher salaries and high living standards) are
greater than the cost of migration. So,
migration leads to human capital formation,
through fuller or better utilization of skills

EXPENDITURE ON INFORMATION

Expenditure on Information:
Expenditure is incurred to acquire
information relating to job markets
and educational institutions. people
can get information about various
types of jobs, salaries in the market,
training institutes, educational
institutions, etc. It enables people to
use their potential in a better
organization. Accordingly
expenditure on information is
another determinant of human
capital formation.
 ECONOMICS
XII-(2023-24)

PART -2
VIDEO
NOTES
 NCERT: National Council of educational Research and Training.
UGC: University Grants Commission.
AICTE: All India Council of Technical education.

ICMR: Indian council of Medical Research

MCI: Medical Council of India

IMPORTANCE OR ROLE OF
HUMAN CAPITAL FORMATION

RAISE EFFICIENCY AND PRODUCTIVITY OF PHYSICAL

CAPITAL

BRING POSITIVE CHANGE IN WORK ENVIRONMENT

RAISE EQUITY AND PARTICIPATION IN THE SOCIETY

INVENTIONS, INNOVATIONS AND TECHNOLOGICAL

ADVANCEMENT

HIGHER INCOME AND STANDARD OF LIVING

CONTROL OF POPULATION GROWTH

 1. RAISE EFFICIENCY AND
PRODUCTIVITY OF PHYSICAL CAPITAL:
Physical capital becomes more productive if the country
possesses sufficient human capital. Machineries and other
industrial equipment's become more productive and can be
efficiently utilized due to human capital. Engineers and
other technical skilled workers can certainly handle the
machines and other productive assets in a better way.

2. BRING POSITIVE CHANGE IN

WORK ENVIRONMENT:
Human capital formation brings a positive change at
work environment by increasing the capabilities of
human beings company also spend large amount on
training of employees and improve their skills,
communication and develop a positive attitude. A more
positive environment helps to yield more economic
growth as people become more growth oriented.

3. RAISE EQUITY AND

PARTICIPATION IN THE SOCIETY:
Human Capital is responsible for economic equality in a
society. By enhancing productive capacities of labour forces,
human capital formation increases the rate of participation.
Higher the rate of participation, greater is the degree of
economic and social equality in the society. higher rate of
equality brings social justice and also development.
 4. INVENTIONS, INNOVATIONS AND
TECHNOLOGICAL ADVANCEMENT:
Human capital formation stimulates innovations and
inventions. Education provides the knowledge to
understand the change in the society, requirement of
technology in different sectors, scientific research,
medical science, which facilitates inventions and
innovations.

5. HIGHER INCOME AND

STANDARD OF LIVING:
Human Capital formation generates more jobs
according to the capabilities of human beings and
these job opportunities raise the income and improve
living standard of people of a country life expectancy of
the people also raises.

6. CONTROL OF POPULATION GROWTH:

It has been observed that educated persons have small
families as compared to uneducated families. Spread of
education is the only way to reduce the growth of population.
It has been seen in Kerala (a highly educated state) having
female to male ratio higher than 0.99. The ratio is 1.084 i.e.
1084 females per 1000 males.
 PROBLEMS OF HUMAN CAPITAL FORMATION

1. Insufficient Resources
2. More Population
3. Poverty
4. Brain Drain
5. Less Expense on Research and development
6. Lack of Girls Education
7. Poor Performance of govt. schools
8. Educated Unemployment.

RISING POPULATION
1.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.

LONG TERM PROCESS:

The process of human development is a long
term policy because skill formation takes time.
 BRAIN DRAIN
1.Migration of highly skilled labour termed as
“Brain Drain“ adversely affects the economic
development. It leads to the loss of highly
skilled and talented people such as scientists,
administrators, executives, engineers,
physicians, educationists, etc.

HIGH REGIONAL AND GENDER INEQUALITY

Regional and gender inequality lowers the
human development levels.

INSUFFICIENT ON THE JOB

TRAINING IN AGRICULTURE
Agriculture sector is neglected where the
worker’s are not given on-the job training to
observe emerging new technologies.

HIGH LEVEL OF POVERTY

A large proportion of the population lives below
poverty line and don't have access to basic
health and educational facilities. A large
section of society can’t afford to get higher
education or expensive medical treatment for
major disease.
 HUMAN CAPITAL &
HUMAN DEVELOPMENT
Human Capital and Human development are
related concepts, but there is a clear
distinction between them. Human Capital
considers education and health as a means to
increase labour productivity. it is a narrow
concept which treats human beings as means
to achieve higher productivity, investment in
education and health is unproductive if it
does not enhance output of goods and
services. Human development is the idea
based on that education and health are
integral part of human well being because
only when people have the ability to read and
write and lead a long and healthy life. It is a
broader concept which considers human
beings as ends in themselves. Human
development occurs when majority of people
in the economy are educated and healthy.

EDUCATIONAL SECTOR IN INDIA

01. Government should spend

more on Education

02 Regulate Government
Schools

03 Promote Girls Education

 PROVISION OF FREE AND
COMPULSORY EDUCATION

In 2009, the government of India enacted the

Right to education Act to Make Free
education a Fundamental right of all children
in the age group of 6 to 14 years.

Govt. of India also started Levying a 2%

“Education cess” on all Union Taxes to spend
on Elementary education

Government Sanctioned a large outlay for the

promotion of Higher education and new loan
scheme for students to pursue higher
education.

SSA has been launched in 2001-2002 in

partnership with the State Governments and
Local Self Governments. The programme aims to
provide useful and relevant, elementary
education to all children in the 6 to 14 age group
by 2010.
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