P.P.

SAVANI CHAITANYA VIDYA SANKUL, CBSE

Worksheet (2023-24)
STD: - 12th Com Worksheet
Sub: IED Human Capital Formation

1. Read the following statements carefully.

Statement 1: On-the-job trainings help to bridge a gap between theoretical concepts and practical experiences.
Statement 2: On-the-job trainings update the employees, with the latest changes in their work field.
In the light of the given statements, choose the correct alternative:
(A) Statement 1 is true and statement 2 is false. (B) Statement 1 is false and statement 2 is true.
(C) Both statements 1 and 2 are true. (D) Both statements 1 and 2 are false.
2. Why do we need to invest in human capital?
(A) Skill development (B) Increase efficiency
(C) Increase productivity (D) All of the above
3. State whether the following statements are true/false, with valid arguments:
(a) Human Capital and Human Development are one and the same thing.
(b) India has a poor stock of technical manpower.
4. “India has failed to implement the recommendations of Education Commission of 1964-66.” Give valid arguments
in support of the given statement.
5. How is human development a broader term as compared to human capital?
6. Read the following extract and answer the question that follows:
Human capital refers to stock of ‘skill and expertise’ embodied in humans. Human capital is as important as
physical capital for economic development. Human capital formation is the process of adding to stock of human
capital over time. Human capital can be developed through creation of skilled, trained and efficient labour force
by providing better education, health care facilities, etc. Highly skilled people can create new ideas and methods
of production. Thus, expenditure on education, on health and on on-job-training are key instruments of human
capital formation. Expenditure on education is one of the most important way of enhancing and enlarging a
productive workforce in the country. Expenditure on health can create more efficient and more productive human
capital. Further, on-the-job-training helps workers to update skills. Training enhances the productivity and is
expected to accelerate the process of human capital formation.
The human capital formation plays crucial role in the economic development. Firstly, formation of human capital
would tend to change the traditional society to modern society, which has higher scope for economic
development. Secondly, human capital increases the productivity of the physical capital (for example, they can
handle the tools and machines in better way). Enhanced productivity would accelerate the growth. Thirdly, higher
standard of life is possible only via development of human capital. Fourthly, human capital formation facilitates
the use and growth of innovation. Innovation is the principal determinant of growth. Fifthly, human capital
formation increases the rate of participation. Higher the rate of participation, greater is the degree of economic
equality in the society. Finally, investment in human capital yields larger returns and the returns on this type of
investment far outweigh its input costs. For example, training of the workers increases their productivity which
ultimately leads to overall increase in production. There are several problems of formation of human capital in
India. On-the-job training should be provided to working population to create a productive human capital
formation.
(a) Human Capital Formation is an instrument of economic changes". Explain.
(b) "Human Capital in India faces a lot of problem." Explain.
 Answer Key
1. Option (C) is correct.
Explanation: On-the-job training is a source of human capital formation as it increases the skill and efficiency
of the workers. It bridges the gap between theoretical concepts and practical experiences and leads to an
increase in production and productivity. It is a kind of up gradation in the skills of workers. Thus, both statements
are correct regarding human capital formation.
2. Option (D) is correct.
Explanation: Human Capital development helps in the development of skills, production, efficiency and
productivity of an individual.
3. (a) The given statement is not true to perfection. These two may sound similar but are not exactly same.
Whereas, human capital considers education and health as a means to increase labour productivity, human
development is based on the idea that education and health are integral to human wellbeing.
(b) The given statement is not true. India has a rich stock of scientific and technical manpower in the world.
Also, India has taken a number of steps to improve it qualitatively and ensure that they are optimally utilized.
4. The expenditure on education is very less as compared to the desired level of education expenditure
recommended by the various commissions. Education Commission of 1964- 66 had recommended that at least
6 % of GDP should be spent on education so as to make a noticeable rate of growth in educational
achievements. However, the current level expenditure is little over 4 percent, which is quite inadequate. Over
the years India has not been able to raise the educational standards to the desired level. India has a rich stock
of scientific and technical manpower in the world. We need to improve it qualitatively and provide such
conditions, so that they are utilised in our own country.
5. Human development is a broader term as compared to human capital because human capital is a means to an
end whereas human development is an end in itself. Human capital considers education and health as a means
to make human being a good productive person. Human capital is a means to an end where means implies skills
that are used in the process of production and end denotes the consequent increase in the productivity. The
higher level of output can be achieved through extensive application of human capital.
On the other hand, human development is an end in itself which refers to the holistic development of the
individuals. The development can be possible only by acquiring good education and attaining good health.
Therefore, education and health are the two main features of human development. Human development
occurs when majority of the people in the economy are educated and healthy. Thus, the end signifies the
development of an individual via education and health. Therefore, we can conclude that human development
is a broader term as compared to human capital.
6. (a) Human capital formation is an important tool for bringing about economic change in the society. Education
is one of the important elements of human capital formation. Education helps people in changing their attitude
and values. People tend to acquire growth-oriented attitude and aspirations. With education, the traditional
attitude of the people is replaced by modern attitude. Their attitude to work and save undergoes a radical
change so as to promote economic growth. Educated and skilled people are helpful in innovating new ideas
and new methods of production. Innovation is the life-line of economic growth. Thus, we can say that human
capital formation is an important instrument for bringing economic changes.
(b) Despite India is known as fastest growing economy, massive poverty continues to grow in the country. The
important factors responsible for the phenomenon are:
(i) Rapid Population Growth among the Poor: A high rate of population growth in India, particularly among the
poor, is responsible for the problem of poverty in the country. Population growth among poor people is high
because of their illiteracy, traditional attitudes, lack of family planning practices, preference for the male child,
etc. Obviously, with low level of employment and large sized families, income per head of the population is low
and inadequate to meet even the basic minimum needs of the people.
(ii) Low Rate of Economic Growth: A very important cause of poverty is the low rate of economic growth. The
rate of economic growth in India has been below the required level. This has kept the poor families in the state
of poverty. Low rate of growth in the economy is responsible for low standard of living and high level of
unemployment, and low standard of living leads to low rate of growth due to low efficiency of the people, low
savings and investment.
(iii) Unemployment: An important factor accounting for the incidence of high poverty, particularly in the rural
areas, is the high level of unemployment and underemployment. High level of unemployment in the country
has resulted from high growth rate of population, low rate of economic growth, development strategies during
the Plans that gave more emphasis on capital intensive projects generation of low employment in agriculture
in recent years, etc. High level of unemployment is responsible for lower output and hence, lower income.
(iv) Growth Strategy: Development strategy pursued in the Plans has not been designed to fight poverty. In
fact, the growth strategy has kept the poor out of the development process. The emphasis all along till the
recent years has been more on the development of capital goods industries. This has added to the problem of
poverty by slowing down growth in employment and by lowering the growth in the availability of consumer
goods.
(v) Inequalities of Income: A larger proportion of increased income during the Plans has been cornered by the
rich persons. The inequalities are caused by unequal distribution in the ownership of assets, both in the urban
and rural areas. In view of large inequalities in the distribution of income and assets, even a small rise in per
capita income could not reach the poor. Hence, the problem of poverty has become more acute.
(vi) Political Factors: Political structure of the country is also one of the factors accounting for the continued
poverty. Political power is concentrated in the hands of the upper strata of the society, both in the urban and
rural areas. There is domination of the higher caste groups even at the level of village panchayats. Economic
policies are formulated to promote the interest of the richer section of the society such as Industrialist, traders
landlords, and rich farmers. Poor people particularly poor peasants, landless labourers, tribal people, slum-
dwellers etc., are suffering in this process.