Explaining The Role of Human Capital in Economic Development of a Country, Highlight the Challenges and Opportunities Related to Human Capital Formation in India. (150 Words / 10 M) (GS-3 Economy)

Approach:

1. Briefly explain the concept of Human capital and the role of human capital in economic development.
2. Discuss the challenges of human capital formation in India.
3. Analyse the opportunities for human capital formation in India.

Human Capital is a measure of the knowledge, skills, capacity and attributes of the human resource of a country, which influence their productive capacity and earning potential.

Role of human capital in economic development:

• Increases productivity: It promotes innovations and creativity; creates ability to absorb new technologies for optimum utilization of natural resources.
• Higher levels of human capital lead to higher employment rates. This increases income levels and help reduce income inequality.
• Brings positive outlook to society: helps overcome regressive thinking, thereby increasing the rate of participation of the workforce, example: promotion of gender inclusive employment.

Challenges to human capital formation in India:

• Low expenditure on health, education and skill development.
• Rising population reduces per head availability of the existing social and economic infrastructure.
• High level of Poverty and regional inequality denies a large population access to basic amenities.
• Increasing gender gap hampers equal opportunity and reduces labour productivity.
• Brain drain slows down the human capital formation in the domestic economy.
• The process of skill formation is long term, hence slow.
• Insufficient on the job training to absorb emerging new technologies.

Opportunities for human capital formation in India:

• Demographic dividend – 65% of India’s population is below the age of 35 years and the working age population (15-64 years) is over 25%.
• A large English speaking population and a strong IT base may be harnessed for further skill development (For example SWAYAM platform for e-learning).
• Global and technological interconnectedness providing for broad opportunities for skill development and training.
• Provision of Constitutional and socio-legal rights to provide a support base for improvement of health and social status in India.
• NITI Aayog’s Sustainable Action for Transforming Human Capital in Education (SATH-E) Roadmaps 2018-2020 to improve learning outcomes.
• Further, initiatives like National Institutional Ranking Framework (NIRF), grading of ITIs, Takshashila (Trainers and Assessors Portal) etc. will go a long way in enhancing the human capital in India.