Indian Economic Development Chapter 4 Human Capital Formation In India VBQs Set 02

'Very Short Answer' Objective Type Questions

Question. Define human capital.
Answer: Human capital refers to the stock of 'skill and expertise' of a nation at a point of time.

Question. What is meant by human capital formation?
Answer: Human capital formation refers to the process of adding to the stock of human capital over time.

Question. What are the possible sources of human capital formation?
Answer: Sources of human capital formation are: (i) Expenditure on education, (ii) Expenditure on health, (iii) On-the-job training, (iv) Study programmes for adults, (v) Migration, and (vi) Expenditure on information.

Question. What is human development?
Answer: Human development refers to development of the individuals as valuable personalities by acquiring good education and attaining good health.

Question. What is physical capital?
Answer: Physical capital refers to the produced means of production. Stock of physical capital measures production capacity of a nation.

Question. What is financial capital?
Answer: Financial capital refers to paper claims against physical capital.

Question. What is 'on-the-job training'?
Answer: On-the-job training is a form of training taking place in a normal working situation.

Question. What is migration?
Answer: Migration refers to movement of people across different areas (like from rural to urban areas) of the country in search of job opportunities.

Question. What is brain drain?
Answer: Brain drain refers to migration of skilled manpower to developed countries of the world.

Question. What is Right to Education?
Answer: In the year 2009, the Government of India has passed an Act, called RTE. It makes education a matter of right to all children in the age group of 6-14 years.

Reason-based Questions (Comprehension of the Subject-matter)

Read the following statements carefully. Write True or False with a reason.

Question. 'Skill India' programme launched by the government is an attempt to increase human capital formation.
Answer: True. Because 'skill' is an important element of human capital.

Question. 'Start-ups' and 'Skill India' programmes are complementary to each other.
Answer: True. Because, one programme promotes the other. Thus: (i) 'Start-ups' (new business ventures) helps utilisation of the idle entrepreneurial abilities of the people. It, thus, promotes skill formation. (ii) Skill formation (through higher education and training) helps the establishment of 'start-ups'.

Question. Higher salaries in developed countries are ultimately related to higher level of human capital in these countries.
Answer: True. Because, salaries are related to productivity (higher productivity implies higher salaries) and productivity is related to the level of human capital (higher level of human capital implies higher productivity).

Question. Benefits of education always exceed the cost of education.
Answer: True. Because, the benefits of education accrue throughout the service span of an individual (spread over several years) while the cost of education is restricted only to the period of education (spread over a few years). However, the underlying assumption behind this assertion is that after education, an individual remains employed throughout his service span of life.

Question. Skill formation facilitates conversion of 'economic growth' into economic development.
Answer: True. Because, skill formation improves the rate of participation/employment in the process of growth. Higher the rate of participation, faster is the conversion of growth into development (when the fruits of growth are shared by larger percentage of population).

Question. Education, not the vocationalisation of education is the core element of skill formation.
Answer: False. It is the vocationalisation of education (rather than mere education) which is the core element of skill formation. Education may just be degree-oriented. Vocationalisation, on the other hand, is skill-oriented.

Question. Gender bias in India is a hindrance to the process of skill formation.
Answer: True. Because, gender bias (particularly in rural India) does not favour female education as much as male education.

HOTS & Applications

Question. Migration leads to human capital formation. How?
Answer: It is true that migration leads to human capital formation. Unemployed and underemployed people often migrate from rural to urban areas. This is because: (i) those who are unemployed get opportunities of actualising their skill, and (ii) those who are underemployed get opportunities of fuller utilisation of their skills. In a market economy, migration offers the best opportunities of higher supplies of skill corresponding to higher wages.

Question. Education is an important ingredient of growth. Comment.
Answer: It is true that education is an important ingredient (input) of growth. This is because: (i) education produces civilised citizens, (ii) education produces scientists, engineers, doctors and educationists. These serve as important agents of growth, (iii) education increases the rate of participation through skill formation. It lends momentum to the pace of growth, and (iv) education generates the sense of the social dynamism. It promotes collective effort to frame programmes and policies of growth. Briefly, education gives momentum to the process of growth. Uneducated societies are often backward societies. Educated societies, on the other hand, are developed societies of the world.

Question. Human capital formation increases the efficiency of physical capital. How?
Answer: This happens in two ways, as under: (i) Human capital formation leads to higher level of skills and expertise. Accordingly, labour force is better equipped to handle 'plant and machinery' (physical capital). This raises the efficiency of physical capital by way of higher output per unit of input (of physical capital). (ii) Human capital formation leads to innovations. Implying, new ways of doing things, or doing things better than before. Accordingly, efficiency/productivity rises.

Question. How can enrolment ratio (for a particular level of education) be higher than 100?
Answer: Enrolment ratio refers to the percentage of students of a particular age group enrolling themselves for the relevant level of education. Example: Enrolment ratio for elementary education in India is measured as: \[ \text{Enrolment Ratio} = \frac{\text{Number of students enrolling for elementary education}}{\text{Total number of students in the age group of 6-14 years}} \times 100 \] It is found to be more than 100 in case students enrolling themselves for elementary education happen to be not only of the relevant age group (6-14 years), but even beyond it.

Analysis & Evaluation

Question. Brain drain is a serious bottleneck/constraint in human capital formation and growth process in India. Comment.
Answer: Brain drain refers to migration of skilled manpower to developed countries of the world. Obviously, they migrate for greener pastures (higher wages and better quality of life). Those who migrate include scientists, engineers, doctors and educationists. These are the people of high Calibre. Migration of such people is a serious bottleneck in human capital formation in India. We know 'skill' is an important ingredient of growth. 'Loss of skill' causes a dent in the process and pace of growth.

Question. How is human capital formation helpful in reducing inequality of income?
Answer: Human capital formation is an important means of reducing inequality of income. Higher the rate of human capital formation, greater would be the rate of participation (percentage of population engaged in production activity). Increase in the rate of participation would lead to increase in the share of wages in national income. Accordingly, inequality would reduce.

Question. In developed countries, salaries are higher than in underdeveloped countries, because workers are more productive. Do you agree with this statement? Write your observations using your knowledge of the relationship between human capital formation and productivity.
Answer: This is absolutely true that there is a strong relationship between human capital formation and productivity per worker. Human capital formation occurs when the workers acquire skill and knowledge to do things better than before. This makes them more efficient and therefore more productive. Accordingly, workers get higher wages, as in developed countries of the world. It is owing to the low level of skill formation in underdeveloped countries that the workers are relatively inefficient and therefore, earn relatively low wages (as in India).

Question. As a student of Class XII, you must have drawn your plans of acquiring some specialised skills; may be as an economist or sociologist. How, do you think, your education would become a productive resource? Do you think, benefits of education would exceed the cost of education? Write your observations.
Answer: It is an undisputed fact that education is a productive resource that contributes to the process of growth in the economy. This is because education is the source of knowledge and skill, the critical determinants of productivity. However, to achieve higher levels of productivity, it is important that education is not simply degree-oriented; it should be skill-oriented. Benefits of education always exceed the cost of education, because skill and knowledge generate a multiplier effect on growth and development through innovations and discoveries.

NCERT Questions 

Question. What are the two major sources of human capital in a country?
Answer: (i) Investment in health, and (ii) Investment in education.

Question. What are the indicators of educational achievement in a country?
Answer: Adult literacy level, primary education completion rate and youth literacy rate.

Question. Bring out the differences between human capital and human development.
Answer: The differences between human capital and human development are as follow: Human capital is a means to an end. Human capital is a means in the sense that it consists of 'skills' as used in the process of production. It consists of 'know-how', abilities and expertise used as inputs in the production activity. Human development, on the other hand, is an end itself. It refers to development of the individuals as valuable personalities by acquiring good education and attaining good health. Human development occurs when more and more individuals in a society are educated, healthy and skill-oriented.

Question. What factors contribute to human capital formation?
Answer: The main sources/determinants of human capital formation are as follows: (i) Expenditure on Education: Expenditure on education is the most effective way of raising a productive workforce in the country. (ii) Expenditure on Health: Expenditure on health makes a man more efficient and, therefore, more productive. (iii) On-the-Job Training: On-the-job-training helps workers to sharpen their specialised skills. (iv) Study Programmes for Adults: Programs for adults to make them proficient in their work areas. (v) Migration: Migration contributes to human capital formation as it facilitates utilisation of skills. (vi) Expenditure on Information: Information relating to job markets and educational institutions.

Question. How do government organisations facilitate the functioning of schools and hospitals in India?
Answer: The Union Ministry of education and Ministries of education at State level, Departments of education and various organisations like National Council of Educational Research and Training (NCERT), University Grants Commission (UGC) and All India Council of Technical Education (AICTE) facilitate the functioning of schools and institutions related to education. Similarly, the Ministries of health at the Union and State level, Departments of health and various organisations like Indian Council for Medical Research (ICMR) facilitate institutions which come under the health sector.

Question. Education is considered to be an important input for the development of a nation. How?
Answer: Education is considered to be an important input for the development of a nation. This is because: (i) Education produces good citizens. (ii) It facilitates use of natural and human resources of all regions of the country. (iii) It expands mental horizon of the people. (iv) It helps economic development through greater participation of the people in the process of growth and development.

Question. Discuss the following as a source of human capital formation: (i) Health infrastructure, (ii) Expenditure on migration.
Answer: (i) Health Infrastructure: Expenditure on health makes a man more efficient and, therefore, more productive. His contribution to the production process tends to rise. He adds more to GDP of the nation than a sick person. (ii) Expenditure on Migration: Migration contributes to human capital formation as it facilitates utilisation of (otherwise) inactive skills of the people, or it facilitates fuller/better utilisation of the skills. Gains of migration (in terms of higher salaries) are greater than the cost of migration.

Question. How does investment in human capital contribute to growth?
Answer: Human capital formation contributes to the process of growth as under: (i) Availability of educated and skilled labour force through human capital formation raises the emotional and material environment of growth. (ii) It raises productivity of physical capital. (iii) It facilitates innovative skill that accelerates the process of growth. (iv) It raises the rate of participation and equality in the country.

Question. Bring out the need for on-the-job-training for a person.
Answer: On-the-job-training helps workers to sharpen their specialised skills. It enables them to raise the level of their efficiency/productivity.

Question. Discuss the need for promoting women's education in India.
Answer: Women's education in India is imminent as it improves their economic independence and social status. It enhances their empowerment.

Question. Argue in favour of the need for different forms of government intervention in education and health sectors.
Answer: Yes, need for different forms of government intervention in education and health sectors is necessary on account of the following facts: (i) These sectors need huge investment with a very high fixed expenditure. (ii) It is difficult to expect private investors to invest in health and education unless they are allowed to recover their huge costs through high price of these services. (iii) People in a poor country like ours cannot afford high price for education and health.

Question. What are the main problems of human capital formation in India?
Answer: Following are the main difficulties/problems being faced in the human capital formation in India: (i) Rising Population: Rapidly rising population reduces per head availability of the existing facilities. (ii) Brain Drain: Migration of persons (born, educated and trained in India) to developed countries is a serious threat. (iii) Deficient Manpower Planning: India is facing an explosive problem relating to graduate unemployment. (iv) Insufficient On-the-Job Training in Primary Sector. (v) Low Academic Standards: A large army of half-baked graduates and post-graduates whose deficient skills lowers productivity.