Edx

Problem: Economic Development
Obstacle: Optimum Utilization & Development of
Human Resources
Requirements: Basic Minimum Rights (Health,
Nutrition and Education) & Jobs and Social
Benefits
Challenges: Government Participation and Drive,
Illiteracy, Education, Health, Skill Development,
Job creation, Respectable Wages, Social benefits
like Pension, Insurance, Growth of Savings and
Investment, Capital Investment in Infrastructure
Result or Target: Development of Human
Resources and Spurt in Economic Activity

Concept of
Human
Capital
 Human capital is a collection of traits – all the knowledge, talents, skills, abilities, experience,
intelligence, training, judgment, and wisdom possessed individually and collectively by
individuals in a population. These resources are the total capacity of the people that
represents a form of wealth which can be directed to accomplish the goals of the nation or
state or a portion thereof. The human capital is further distributed into three kinds; (1)
Intellectual Capital (2) Social Capital (3) Emotional Capital
 It is an aggregate economic view of the human being acting within economies, which is an
attempt to capture the social, biological, cultural and psychological complexity as they
interact in explicit and/or economic transactions. Many theories explicitly connect investment
in human capital development to education, and the role of human capital in economic
development, productivity growth, and innovation has frequently been cited as a justification
for government subsidies for education and job skills training.
 The concept of human capital has relatively more importance in labour-surplus countries.
These countries are naturally endowed with more of labour due to high birth rate under the
given climatic conditions.
 The surplus labour in these countries is the human resource available in more abundance
than the tangible capital resource. This human resource can be transformed into human
capital with effective inputs of education, health and moral values.
 The transformation of raw human resource into highly productive human resource with
these inputs is the process of human capital formation.
 The problem of scarcity of tangible capital in the labour surplus countries can be resolved by
accelerating the rate of human capital formation with both private and public investment in
education and health sectors of their national economies.
 The tangible financial capital is an effective instrument of promoting economic growth of the
nation.
 The intangible human capital, on the other hand, is an instrument of promoting
comprehensive development of the nation because human capital is directly related to
human development, and when there is human development, the qualitative and quantitative
progress of the nation is inevitable

Human Capital & Material Capital
 Human capital is distinctly different from the tangible monetary capital due to the
extraordinary characteristic of human capital to grow cumulatively over a long period of time
 On the other hand, human capital has uniformly rising rate of growth over a long period of
time because the foundation of this human capital is laid down by the educational and health
inputs.
 The current generation is qualitatively developed by the effective inputs of education and
health.
 The future generation is more benefited by the advanced research in the field of education
and health, undertaken by the current generation.
 Therefore, the educational and health inputs create more productive impacts upon the future
generation and the future generation becomes superior to the current generation.
 In other words, the productive capacity of future generation increases more than that of
current generation.
 Therefore, rate of human capital formation in the future generation happens to be more than
the rate of human capital formation in the current generation.
 This is the cumulative growth of human capital formation generated by superior quality of
manpower in the succeeding generation as compared to the preceding generation.
 The growth of tangible monetary
capital is not always linear due to the
shocks of business cycles.
 During the period of prosperity,
monetary capital grows at relatively
higher rate while during the period
of recession and depression, there is
deceleration of monetary capital.
There is such a thing as investment in human capital as well as investment in material capital.

Human Capital Development Components
Basic Health Care for
Mothers
Early Childhood care and
Nutrition (Stunting),
Development upto 0-3
years
Primary and Early School
Education
High School Education
Higher Education
Graduation and Skill
Development Programs
Creating Job opportunities
for Skills available
Shifting from Agriculture to
Manufacturing and to
Services dependence
Change or Increase in
Composition of Wages
Introduction of Social
Security benefits for Society
and increase in per capita
income

Providing
basic
health
services for
maternal
health
The maternal health is of utmost importance. A
healthy mother will give birth to a healthy child who
will be fit to survive and live long life. The life
expectancy is growing and the new generation has
right to live in a better world. The health care of
mother who gives birth needs to be taken care by
providing her the necessary medical and healthcare
facilities. Setting up of Primary health centres and
free distribution of medicines in rural and under
privileged areas in the need of the hour in many
underdeveloped countries. It also helps in reduction
of infant mortality and helps the mother too.
Poor countries tend to be
unhealthy, and unhealthy
countries tend to be poor.
Across the broad swath of
history, improvements in
income have come hand-in-
hand with improvements in
health. Health is a kind of
human capital as well as an
input to producing other
forms of human capital.
Being un-healthly depresses
the ability to work
productively and/or the ability
and incentives to invest in
human capital. Taken
together, these mechanisms
imply that worse health
implies lower income.
After the birth of
child, taking care
of the health of
child, nutrition
The primary health care of a child is another area,
which needs to be taken care necessarily. The
immunizations, vaccinations, saving the infant or
child from diseases, proper nutrition requires a lot
efforts.
The investment and onus of providing these basic
health services lies with Government. The child is
future of any country and Government has a major
role in protecting the future generation by ensuring
that the basic minimum health services and proper
nutrition are available at each nook and corner of
country.
An unhealthy child will only become a burden on
available resources. Poor health will affect the
income earning capacity and productivity of the
at a later stage of life, when he becomes adult. We
need to generate assets and not liabilities.

Early school
education and
development of
mind
Much of a person’s physiological and
cognitive development happens in
childhood. Hence, it is important that
after the age of 3, early schooling
facilities are made available to the
child. It is also important to note that
non education leads to severe
imbalances in societies and the
resources of generation are wasted as
they do not contribute to the
development of nation.
An educated population is a
productive population. Education
increases the productivity and
efficiency of workers by increasing the
level of cognitive stock of economically
productive human capability, which is a
product of innate abilities and
investment in human beings. The
provision of formal education is seen
as an investment in human capital.
The illiterate people get trapped in a
cycle of poverty with limited
opportunities for employment or
income generation and higher
chances of poor health, turning to
crime and dependence on social
welfare or charity if available.
Basic minimum
education for
sustenance
Education is an economic good
because it is not easily obtainable and
thus needs to be apportioned.
Hence, the basic minimum education
needs to be imparted to a child. A
has the right to have education and
the development of him/ herself and
the society as whole, it is necessary
the facilities are created to impart the
knowledge and education to the
children.
Formal education is highly
instrumental and necessary to improve
the productive capacity of a

Identifying
the
potential
and
provide
higher
education
It is regarded that education represents both consumer and capital goods, because
it offers satisfaction and also serves as an input to develop the human resources
necessary for economic and social transformation.
The pressure for higher education in many developing countries has undoubtedly
been helped by public perception of financial reward from pursuing such education.
The economic prosperity and functioning of a nation depend on its physical and
human capital stock.
Simply, human capital represents the investment people make in themselves that
enhance their economic productivity.
It is widely accepted that
education creates improved
citizens and helps to upgrade
the general standard of living in
a society. The increased faith in
education as an agent of change
in many developing countries,
has led to heavy investments in
it.
Physical capital has traditionally
been the focus of economic
research, factors affecting the
enhancement of human skills
and talent are increasingly
figured in the research of social
and behavioural sciences.
. The theoretical framework
most responsible for the
wholesome adoption of
education and development
policies has come to be known
as human capital theory.
To contribute significantly to
economic growth and
development, education must be
of high quality and also meet the
skill-demand needs of the
economy.
There seems to be a strong
correlation between an educated
population and technological
innovation. The link is made
explicit in what is
termed investment in humans:
workers needed education in
order to utilize new
technologies, thereby increasing
the total productivity and
inducing economic growth.
Skill
developm
ent
courses
like,
Engineerin
g &
Technolog
y,
Managem
ent,
Services
sector etc.
The focus on education as a capital good related to the concept of human capital,
which emphasizes that the development of skills is an important factor in production
activities.
Expansion of educational opportunities and easy access to skill development
programs promotes economic growth.
Education is an engine of growth and key to development in every society, based
on its quality and quantity. In order to make a significant contribution to economic
growth and development, high quality education is required
The productivity of any human is enhanced and sustained based on an increased
and diversified labor force.
The Skill development courses are focussed on creating job opportunities and
develop a highly developed resources pool. Setting up of Higher Studies
Universities, Colleges, Institutes are the prime objective of Government. It can be
done both on Public and Private partnership or by Private or by Government. The
highly skied jobs will help in development of overall economy.
Education has always been considered a key determinant of economic growth; the
central role of technology has provided the impetus for the focus on education. The
accumulation of human capital through education and on-the-job training fosters
economic growth by improving labour productivity, promoting technological
innovation, and adaptation.
During childhood and early adolescence, socialization takes place in the home and
at school. During their transition from school to work, young people become even
more integrated into society through their employment.

Ensuring Job
creation
across
various
sectors
After the impartation of Higher and Skilled Education, the
creation of Job opportunities is an important aspect. The
pace of Manufacturing, Industrialization, Globalization,
Automation has thrown up immense opportunities to the
skilled work force.
They are spread over a spectrum of industries like IT,
Banking, Manufacturing, Management, Services, Legal
etc.
The kind of jobs being created today never existed 10-20
years ago and the basis of same has been disruptions in
businesses and the development of new job opportunities
and accordingly the skilled work force is grabbing them.
The jobs are being created mostly in Private sector with
Government’s push for development of various sectors of
economy.
With globalization, the shifting of labour from one
geography to other and exchange of ideas and technology
has ensured that the jobs be migrated to the developing
economies from developed economies in many sectors
like IT, Manufacturing, BPO industry etc.
The benefits of it has been availed by the work force of the
developing economy as the government had invested in
development of skilled jobs for them.
Job creation has helped in development of Human
resources a lot. Countries like Bangladesh, Vietnam, India,
Cambodia, China have seen the shift of many skilled jobs
from the costly developed countries and have provided
opportunities to the workforce.
Government was able to capture the opportunities
available and provide a platform for development to its
citizens.
As the necessary infrastructure for
funding of Capital goods and heavy
investments are required, there is a
constant requirement of creation of
jobs for skilled labour for efficient
deployment.
Otherwise the problems may be faced
like: underemployment, low absorptive
capacity, shortage of professionals,
regional imbalances, and brain drain.
The persistence of many problems in
spite of the various policy formulation
and responses points to the need for a
more focused, responsive, functional,
and qualitative educational system.

Providing
minimum
basic wages
With the development of Job market and
opportunities and upliftment of
economic well being and higher
education levels, the minimum wage
levels and earning capacity too will
increase.
The skilled jobs require specialization, the
human capital which is skilled can
command the market forces to set up a
minimum level of wages depending
upon the industry, experience, demand
etc.
The government or the employers too
must provide a minimum level of wages,
which can sustain living standards for the
family.
It becomes imperative for the Country to
have such governance structures in
place, which helps in upliftment of the
standards of its human capital. The
income thus at the disposal in the hands
of the employees gives rise to
consumptions, education of children,
improved purchasing power, health
benefits.
Improved Labour Laws are
created for the benefit of
employees. Exploitation of
labour stops, Better governance
and enforcement is ensured.
Better bargaining power in the
hands of the labour ensures that
their living standards improve

Running social
security programmes
of Health Services,
Pension, Insurance,
inculcating Savings
habit etc.
The various social security programmes
such as Pension after superannuation,
free health benefits, Social Security
Insurances schemes, Inculcating savings
amongst the society are few
developments, which helps in improving
the life of citizens.
Establishment of Hospitals, providing old
age pension or social security benefits,
free transportations,
The investment in such programmes
helps the governments to improve the life
cycle of its citizens and also to some
extent helps in raising the standard of
living of citizens
Human capital investment and retirement
benefits are integrated and it along with
social security schemes affects welfare of
human capital and labor supply
The higher or surplus income available
leads to higher savings rate for the
economy as a whole which in turn can be
used for investments in development of
infrastructure and resources, industries
Such programmes
incentivize the citizens to go
through the higher
education, good and skilled
jobs and better prospects of
earnings. The higher
standard of livings or
improved standard of living
is the human desire for the
next generation.
The aim remains to reduce
poverty, Sustainable
development of the future
generations,

O T H E R E C O N O M I C
A C T I V I T Y I . E .
C O N S U M P T I O N
P A T T E R N S ,
H O U S I N G , F O O D ,
S H E L T E R ,
E D U C A T I O N
O P P O R T U N I T I E S .
E L E C T R I C I T Y ,
S A N I T A T I O N ,
W A T E R , I N D U S T R I A L
D E V E L O P M E N T
T H E O V E R A L L I N V E S T M E N T I N T H E H U M A N C A P I T A L A S S T A T E D A B O V E L E A D S T O
V A R I O U S B E N E F I T S F O R T H E C O U N T R Y .
T H E D E V E L O P E D A N D S A T I S F I E D M I N D C A N A L W A Y S H E L P I N I M P R O V E D
C O N S U M P T I O N A C T I V I T Y , I N F O R M E D D E C I S I O N S R E L A T I N G T H E F U T U R E
G E N E R A T I O N S .
I T G I V E S R I S E T O O P P O R T U N I T I E S F O R B E T T E R F O O D A N D S H E L T E R F O R T H E
C I T I Z E N S , B E T T E R E D U C A T I O N F A C I L I T I E S .
H I G H L E V E L S O F A W A R E N E S S A B O U T T H E H E A L T H , S A N I T A T I O N A N D C L E A N
W A T E R .
L E A D S T O I N N O V A T I O N S , I N D U S T R I A L D E V E L O P M E N T , I N F R A S T R U C T U R E
D E V E L O P M E N T , H I G H W A Y S , P O W E R S U P P L Y , D A M S , R E N E W A B L E R E S O U R C E S ,
S U S T A I N A B L E D E V E L O P M E N T , E F F I C I E N T U T I L I Z A T I O N O F A V A I L A B L E R E S O UR C E S .
W I T H H I G H L E V E L O F D E V E L O P M E N T O F M I N D S
A N D T H O U G H T P R O C E S S E S , O P P O R T U N I T I E S A R E
E X P L O R E D F O R T H E B E T T E R M E N T A N D
U P L I F T M E N T O F S O C I E T Y .
O T H E R E C O N O M I C A C T I V I T I E S S T A R T P I C K I N G U P
L E A D I N G T O A C H A I N R E A C T I O N I N T H E
E C O N O M Y T O D I V E R T A N D E F F I C I E N T L Y U S E T H E
R E S O U R C E S
O V E R A L L I M P A C T L E A D S T O D E V E L O P M E N T A N D
G R O W T H

Results of Development of Human Capital is
Socio Economic Transformation
Better Health Care facilities
Better Development of Child
Good Schooling and early
Education benefits
Higher Education & Skill
Development Colleges
New Job opportunities made
available due to shifting of
jobs from Developed to
developing countries
Change of Composition in
GDP contribution
Higher & Competitive wages
and rise in Per Capita
Income
Introduction of Social
Security benefits like
Pension, Insurance, Subsidies
and Savings
Migration or Shifting from
Agriculture to Manufacturing
and to Services dependence
Increased Industrial Activity
for Consumption leading to
growth of Industrial &
Manufacturing Production
and GDP growth
Exports of Services Sector,
Development of Banking
Activities, MSMEs, Forex
Reserves,
Development of Urban and
Metro centre, Shifting from
Villages to Urban centres
Development of
Infrastructure activities,
Roads, Power, Industrial
Factories, Housing,
Sanitation conditions,
Leads to Higher Economic
Development
Creation of Wealth for the
Country/ Human Capital
turns into Assets and
provide return to economy

INVESTMEN
T IN HUMAN
CAPITAL
IMPROVED
HEALTHCARE
CHILD AND
EARLY
SCHOOLING
DEVELOPMENT
OF MINDS,
ANALYTICAL
CAPABILITIES,
HIGHER
EDUCATION
AND SKILL
DEVELOPMENT
JOB CREATION,
HIGHER PER
CAPITA
HIGHER
SAVINGS, MORE
AWARE ABT
DERIVING
BENEFITS FROM
IMPROVED,
INFRASTURCTU
E, HEALTHCARE,
SOCIAL
THRUST OR MORE
PUSH FOR
DEVELOPMENT OF
NEXT GENERATION
BY INVESTING IN
HUMAN CAPITAL

Social Security, Employee Rights, Contributtion to GDP and per Capita GDP, Well being index

 Poverty often robs people of their opportunities, hopes
dignity, and confidence in their abilities. But when this
happens to children, it does not just impact their lives, it
endangers the future of that community and society as a
whole. Children growing up today cannot wait for the
results of economic development programmes. Their
bodies, brains, abilities and life ambitions are developing
today, and they need support now. Although it is not
possible to reduce poverty or income imbalances
considerably in one night, it is possible to decrease the
impact of poverty on children through smart public policy
and public-private partnerships.
 Investment in the future generations may also be called
investment in the Human Capital to put in simple words.
 It is necessary for Pubic and Private to join together for
development of Economy
 Government need to formulate policy and provide
opportunities for such development
 It needs to invest heavily in Health, Primary and Higher
Education, Social Justice, Infrastructure, Job creation
activities, promote Private investment with focus on
Exports of Services & reduction in Imports, and push for
Manufacturing activities is required for diverting the
labour as potential assets
 Usage of financial Inclusion, plugging loop holes in social
benefits, Social Insurance and Savings acceleration, Push
for GDP growth should be part of Economic policy of any
Government

In India many such initiatives have been launched such as Samagra Shiksha (Education of Children),
Ayushman Bharat (Health Coverage), Swachh Bharat Mission (Sanitation), Pradhan Mantri Ujjwala
Yojana (providing fuel), Pradhan Mantri Jandhan Yojana (Financial Inclusion by opening bank
accounts), Pradhan Mantri Kaushal Vikas (Skill Development) Minimum Wages and Provident Fund
and Pension Fund benefits for investment and the Aadhaar identification system-enabled direct cash
transfer (social Security benefits transfer like subsidies, old age pension etc.), Make in India Initiatives
for MSME, Heavy Investment in Infrastructure that have improved governance and social protection.
“These initiatives are transforming human capital in India at a rapid pace and very comprehensively
touching upon the lives of millions of people living in rural and tribal areas

 Rate of Savings in India went as high as
39% at one time driving growth of
economy
 Shifting of Labour from Agriculture to
Industries and Services Sector in GDP%
 Growth of Higher Education Institutions

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