NCERT Notes for Class 12 Economics Chapter 5 HUMAN CAPITAL FORMATION IN INDIA


NCERT Notes for Class 12 Economics Chapter 5 HUMAN CAPITAL FORMATION IN INDIA, (Economics) exam are Students are taught thru NCERT books in some of the state board and CBSE Schools. As the chapter involves an end, there is an exercise provided to assist students to prepare for evaluation. Students need to clear up those exercises very well because the questions inside the very last asked from those.

Sometimes, students get stuck inside the exercises and are not able to clear up all of the questions.  To assist students, solve all of the questions, and maintain their studies without a doubt, we have provided step-by-step NCERT Notes for the students for all classes.  These answers will similarly help students in scoring better marks with the assist of properly illustrated Notes as a way to similarly assist the students and answer the questions right

NCERT Notes for Class 12 Economics Chapter 5 HUMAN CAPITAL FORMATION IN INDIA




  • Skilled and efficient human resources are called human capital, eg. Doctors, engineers etc.
  • Investment in education is considered as one of the main sources of human capital , others are:
  • Investments in health
  • job training
  • Migration
  • Information

Physical and Human Capital

  • Both the forms of capital formation are outcomes of conscious investment decisions. Decision regarding investment in physical capital is taken on the basis of entrepreneur‘s knowledge in this regard.
  • The entrepreneur possesses knowledge to calculate the expected rates of return and then rationally decides which one of the investments should be made.
  • Physical capital formation is mainly an economic and technical process.
  • The human capital formation takes place in one’s life.
  • The peers, educators and society influence the decisions regarding human capital investments.
  • Human capital formation is partly a social process and partly a conscious decision of the possessor of the human capital.

Human Capital and Economic Growth:

  • Economic growth means the increase in real national income of a country; naturally, the contribution of the educated person to economic growth is more than that of an illiterate person.
  • A healthy person could provide labour supply for a longer period of time therefore health is also an important factor for economic growth.
  • Education and health, job training, job market information and migration, increase in the income generating capacity of an individual.
  • Education provides knowledge to understand changes in society and scientific advancements which helps invention and innovations.
  • Thus, economic growth in each sector has reinforced the growth of every other sector.
  • Reports on the Indian economy, in recent times, have identified that India would grow faster due to its strength in human capital formation.
  • Human capital treats human beings as a means to an end; the end being the increase in productivity.
  • Human welfare should be increased through investments in education and health.


  • Human capital formation is the outcome of investments in education, health, job training, migration, and information. Of these education and health are very important sources of human capital formation.
  • Expenditures on education and health make substantial long-term impact on human capital formation. Expenditures on both education and health are to be carried out simultaneously.
  • In India, there are various organizations in education and health, at the union and state level.
  • National Council of Educational Research and Training (NCERT), University Grants Commission (UGC) and All India Council of Technical Education (AICTE) facilitate institutions which come under the education sector.
  • Indian Council for Medical Research (ICMR) facilitates institutions which come under the health sector.
  • In a developing country like India, with a large section of the population living below the poverty line, many of them cannot afford to access basic education and health care facilities.

Growth in Government Expenditure on Education

  • Government Expenditure on Education is expressed in two ways
  1. as a percentage of ‘total government expenditure’
  2. as a percentage of Gross Domestic Product (GDP).
  • The percentage of ‘education expenditure of total government expenditure’ indicates the importance of education in the scheme of things before the government.
  • The percentage of ‘education expenditure of GDP’ expresses how much of our income is being committed to the development of education in the country.
  • Elementary education takes a major share of total education expenditure and the share of the higher education is the least. Educational Achievements in India
  • Educational achievements in a country are indicated in terms of adult literacy level.
  • Education for All is still a Distant Dream.

Gender Equity

  • The differences in literacy rates between males and females are narrowing which is a positive development in gender equity.
  • Still, we need to promote education for women in India because for improving economic independence and social status of women.
  • Women education makes a favorable impact on fertility rate and health care of women and children.

Higher Education

  • The Indian education pyramid is steep, indicating lesser and lesser number of people reaching the higher education level.
  • The level of unemployment among educated youth is the highest.
  • The government should increase allocation for higher education and also improve the standard of higher educational institutions.
  • The economic and social benefits of human capital formation and human development are inseparable.

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