NCERT Solutions for Class 12 Economics Part B Chapter 4 Human Capital Formation In India

1. What are the two major sources of human capital in a country?

Ans. The two major sources of human capital in a country are investment in education and health respectively.

2. What are the indicators of educational achievement in a country?

Ans. Educational achievement is measured by some of the crucial indicators like primary education, youth literacy and adult literacy.

3. Why do we observe regional differences in educational attainment in India?

Ans. Regional differences can be seen in attaining the adequate educational level in India is mainly due to :

(i) Inequality of income

(ii) Government expenditures in education facilities across different states.

4. Bring out the differences between human capital and human development.

Ans. Difference between Human Capital and Human Development

Rise in Human Capital	Rise in Economic Growth
Modern attitude and outlook, better quality of life, higher life expectancy More efficiency More production More economic growth	Rise in per capita income More investment in education and health Rise in human capital

5. How is human development a broader term as compared to human capital?

Ans. Human capital is relatively a narrow concept that treats human beings as a means to fullfill a goal which happens to be higher productivity, failing which the investment is not considered to be productive. Whereas, Human development is a broader concept which undertakes human beings as ends in themselves. Human welfare can be achieved by making adequate investments in education and health. It considers welfare to be a right of every individual irrespective of their contribution to labour productivity. Every individual has right to be literate and lead a healthy life.

6. What factors contribute to human capital formation?

Ans. Factors that contribute to Human Capital Formation are:
(i) Expenditure on Education
(ii) Training
(iii) Expenditure on Health
(iv) Migration
(v) Expenditure on Information.

7. How government organisations facilitate the functioning of schools and hospitals in India?

Ans. The government organisations play an important role in the functioning of the schools and hospitals in India. Expenditure on education and health are carried out by all the branches of government whether at central level or state level or local government.

The government has set up various organisations to promote the health and education facilities, some of them are:

(i) NCERT, which is responsible for designing the text books for school level education.

(ii) UGC, which provides funds to the university education and it circulate rules and regulations regarding the higher education in India.

(iii) AICTE, which formulates rules and regulations regarding the technical education in India.

(iv) ICMR, which formulates rules and regulations related to education and research in health sector in India.

(v) National Institute of Health and Family Welfare, which is responsible for promotion of various health and family welfare programmes in India.

8. Education is considered an important input for the development of a nation. How?

Ans. Education is undoubtedly an important source of human capital formation, because:

(i) It infuses technical skills and creates a manpower which is best suited for improving labour productivity. Furthermore, results in sustained economic development as well.

(ii) It has the potential to bring down birth rate which, results in decline in population growth rate. It improves the availability of resources per person.

(iii) It results in social benefits as it spreads to others who may not be skilled. Thus, investment in education paves the way to higher returns in future.

9. Discuss the following as a sources of human capital formation:
(a) Health infrastructure
(b) Expenditure on migration.

Ans. (a) Health Infrastructure: Health is yet another important source of human capital formation. Preventive medicine (vaccination), curative medicine (medical intervention during illness), social medicine (spread of health literacy) and provision of clean drinking water and good sanitation are some of the various important forms of health expenditure. Health expenditure directly leads to an increment in the supply of healthy labour force as a healthy person adds more to GDP of the nation as compared to a sick person because a healthy man is more efficient, therefore more productive.

(b) Migration: People sometimes have to migrate from one place to the other in search of better employment opportunities. It includes migration of people from rural areas to urban areas in India and migration of technical personnel from India to other countries of the world. Migration in these both cases results in heavy cost of transport, higher cost of living in the migrated places and psychic costs of living in a strange socio-cultural set-up. The enhanced earnings in the new place outweighs the costs of migration. Hence, one can say that, expenditure on migration is also a source of capital formation.

10. Establish the need for acquiring information relating to health and education expenditure for the effective utilisation of human resources.

Ans. People should be aware of the cost and benefit of investment in health and education. When people are well informed about the benefits of their investment in these two areas, they make more expenditure. This further results in more human capital formation.

11. How does investment in human capital contribute to growth?

Ans. Role of Human Capital Formation in Economic Growth:
(i) Raises production .
(ii) Raises efficiency and productivity.
(iii) Brings positive changes in outlook and attitudes.
(iv) Improves quality of life
(v) Raises life expectancy
(vi) Raises social justice.

12. ‘There is a downward trend in inequality world-wide with a rise in the average education levels’. Comment.

Ans. With the increase in the education level, the inequalities of income reduce because the educated persons have more ability and skills and so they can earn better. They can utilise inputs in the best possible manner which increases the productivity as well as with help of education they can earn better which improves the standard of living and the quality of life.
The increase in the literacy level reduces the inequalities in income and wealth and this benefit of education has forced the Govenment of various countries to invest more and more in the education sector.

13. Examine the role of education in the economic development of a nation.

Ans. Education plays a significant role in economic development due to the following reasons:

(i) Education enhances people's receptivity to modern and scientific ideas, leading to increased efficiency.

(ii) In creates greater awareness of available opportunities and facilitates labour mobility.

(iii) Education imparts knowledge, skills and attitudes that enable individuals to contribute to productive programs and initiatives.

(iv) Through research and development, education prepares learned scientists and researchers who drive innovation in various fields, resulting in the development of new products, technologies and processes that contribute to economic growth.

(v) Education raises the standard of living by improving individual's income-earning capacity.

(vi) Education enables a larger portion of the population to participate in the economic, social and political activities of a nation, thereby increasing overall participation in the development process.

14. Explain how investment in education stimulates economic growth.

Ans. Investment in education is a key factor in the growth knowledge economy. It can stimulate the economic development in the following ways:

(i) Raises production: Investment helps in acquiring knowledgeable and skillfull workers. They can make a better use of resources which are available to them. It will increase the production in the economy. An educated and trained person can apply his knowledge and skill at farm, factory and office from where he can earn returns and increase production.

(ii) Raises efficiency and productivity: Investment in education results in increased efficiency and productivity, and hence yields higher income to the people.

(iii) Productivity changes the outlook and attitudes: Knowledgeable and skilled people have modern outlook and attitudes, that they make rational choice in respect of places and jobs.

(iv) Improves quality of life: Education is also responsible for improving the quality of life as it provides better job, high income and improves health. It ultimately results in better standard of living.

15. Bring out the need for on-the-job-training for a person.

Ans. Technical training increases the capacity of the people to produce more. Firms extend on-the-job-training to enhance the crucial productive skills of the workers so as to enable them to adapt to the new technologies and modern ideas.

It can be given in two forms:

(i) The workers may be trained in the firm itself under the assistance of a senior and experienced worker.

(ii) The workers may be sent off the firm campus for the training.

16. Trace the relationship between human capital and economic growth.

Ans. Human capital formation elevates the process of economic growth eventually and economic growth raises the process of human capital formation. There is a cause and effect relationship between human capital and economic growth.

It is shown in the figure:

17. Discuss the need for promoting women’s education in India.

Ans. Women Education Council has been set up with the aim of providing technical education to the women. Many women polytechnics has been established. It is essential to promote women’s education in India to:

(i) Improve women’s economic independence along with improving their social status.

(ii) Make a positive impact on fertility rate and health care of women and children.

18. Argue in favour of the need for different forms of government intervention in education and health sectors.

Ans. Government intervention in education and health sectors is necessary because of the following reasons:

(i) Education and health care services have the potential to create both private as well as social benefits. Both private and public institutions are expected to provide these services and government must keep a constant check on them.

(ii) Expenditure on education and health institutes are very crucial for the growth of a nation. The private providers of education and health services are required to be regulated by the government.

19. What are the main problems of human capital formation in India?

Ans. Main problems of human capital formation in India are:

(i) Rising Population: Rapidly rising population has an adverse effect on the quality of human capital formation in developing countries. It reduces the per capita availability of existing facilities. A large population is in great need of huge investment in education and health. This diverts the scarce money to the production of human capital at the cost of physical capital.

(ii) Long Term Process: As skill formation is a time taking process in itself. So, human development is a long-term process. The process which produces skilled manpower is therefore also slow.

(iii) Brain Drain: Migration of highly skilled labour is defined as “Brain Drain” which adversely affects the economic development.

(iv) Insufficient on-the-job-training in agriculture: Agriculture sector is often neglected where the workers are not provided with desired on-the-job training to adapt to the emerging new technologies.

(v) High Poverty Levels: A large proportion of the population lives below poverty line and hence do not have any access to basic health and educational facilities. A large section of society is unable to afford the higher education or expensive medical treatment for major disease.

20. In your view, is it essential for the government to regulate the fee structure in education and health care institutions? If so, why?

Ans. Yes, the intervention of the government is necessary upto a certain extent in regulating the fee structure in education and health care institutions:
(i) to maintain uniformity
(ii) to have accountability
(iii) to help poorer people.