Human Capital Formation Class 12 Important Questions and Answers Indian Economy Chapter 5

Important Questions of Human Capital Formation Class 12 Indian Economy Chapter 5

Question 1.
What is the main objective of human capital formation?
Answer:
The main objective of human capital formation is to make human beings more productive.

Question 2.
According to you, why do people migrate?
Answer:
People migrate in search of better employment opportunities that fetch them higher earnings.

Question 3.
Name the two categories of health expenditures.
Answer:
Two categories of health expenditures are

Preventive medicine (vaccination)
Social medicine (spread of health literacy)

Question 4.
What is meant by human capital?
Answer:
Human capital refers to the stock of skill, ability, expertise, education and knowledge in a nation at a point of time.

Question 5.
Explain the meaning of physical capital?
Answer:
All inputs which are required in the production process such as machine, tools and implements etc are called physical capital.

Question 6.
Name the two ways of ‘On-the-job’ training.
Answer:
Two ways of ‘On-the-job’ training are

Internal training
External training

Question 7.
What is the meaning of human capital formation? Explain with the help of an example.
Answer:
Human capital formation is a process which converts human resources into human capital. It is the process of acquiring and increasing the number of people who have the skills, education and experience which is necessary for the economic development of the country.

For example, if in the year 2014, the number of doctors and engineers in our country were 4,50,000 and in the year 2015, their number grew to 5,00,000, then it can be said that there is human capital formation to the extent of 50,000 doctors and engineers.

Question 8.
Why on-the-job training is given to workers?
Answer:
Firms give on-the-job training to their workers to enhance their productive skills so as to enable them to absorb new technologies and modern ideas.
It can be given in two forms

Training given within the office premises.
Training given outside the office premises.

Question 9.
What factors contribute to human capital formation? (NCERT)
Answer:
The factors which contribute to human capital formation are as follows

Expenditure on education
On-the-job training
Migration
Expenditure on health
Expenditure on information

Question 10.
Establish the need for acquiring information relating to health and education expenditure for the effective utilisation of human resources, (NCERT)
Answer:
People need to have information on the cost and benefit of investment in health and education. When they know the benefits of their investment in these two areas, they are willing to make more expenditure. This results in more human capital formation.

Question 11.
Discuss briefly how health and expenditure on information are a source of human capital formation.
Answer:
Health as a source of human capital has formation Health is an important source of human capital formation because only a healthy worker can contribute towards increasing the capital stock of the country. A sick worker, without access to medical facilities is compelled to abstain from work and there is loss of productivity.

Expenditure on information as a source of human capital formation People spend to acquire information relating to the labour market, education and health institutions etc.
Information relating to job opportunities and educational institutes enables people to increase their earning potential. Therefore, it is also a determinant of human capital formation.

Question 12.
What are the two major sources of human capital in a country?
Answer:
The two major sources of human capital in a country are

Education
Health

Education and health are considered as important inputs for the development of a nation. A better educated person has greater skills and knowledge and therefore greater opportunity to work and earn higher income. Similarly, a healthy person is an asset for the nation as he is more productive than a sick person. Hence, expenditure on education and health are important sources of human capital formation.

Question 13.
Bring out the need for on-the-job training for a person, (NCERT)
Answer:
Firms provide on-the-job training to their workers to enhance their skills which helps in human capital formation. On-the-job training is an important factor of human capital formation as it results in enhanced labour productivity. On-the-job training allows trainees and employees to get acquainted with their co-workers.

Training allows the supervisors or managers to assess progress of a person over a short period of time enabling them to determine any flaws or problems and rectifying the problem on the spot. This leads to higher efficiency of not only the person under training but also the organisation as a whole.

Question 14.
Distinguish between physical capital and human capital.
Answer:
Differences between physical and human capital:

Basis	Physical Capital	Human Capital
Nature	it is tangible and can be easily sold in the market like any other commodity.	It is intangible; built in the body and mind of its owner. It is not sold in the market, only its services are sold.
Ownership	Its separable from its owner.	It is inseparable from its owner.
Mobility	It is completely mobile between countries except some artificial trade restrictions.	It is not perfectly mobile between countries as movement is restricted by nationality and culture.
Formation	It can be built even through imports.	It is to be done through conscious policy formulations.
Benefit	It creates only private benefit.	It creates private and social benefits.
Depreciation	It is subject to depreciation, which is unavoidable.	It is also subject to depreciation, but it could be avoided by expenditure on education and health.

Question 15.
Discuss the following as a source of human capital formation. (NCERT)
(i) Health infrastructure
(ii) Expenditure on migration
Answer:
(i) Health infrastructure It means investment in health facilities to build a physically as well as mentally strong human capital. It is essential for increasing productivity. 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 the various forms of expenditures done on health infrastructure.

These expenditures are considered as important factors for human capital formation as they increase the supply of healthy labour force.
Therefore, health infrastructure is a source of human capital formation.

(ii) Expenditure on migration People migrate in search of jobs with higher salaries than what they may get in their native places. People from rural areas migrate to urban areas in search of employment. Technically qualified persons, like engineers and doctors, migrate to other countries because of higher earnings in such countries.

Migration in both these cases involves cost of transport, higher cost of living in the migrated places and psychological costs of adapting to a new socio-cultural setup. The increase in earnings in the new place outweighs these expenditures of migration. Hence, expenditure on migration is a source of human capital formation.

Question 16.
Human capital formation improves quality of life. How?
Answer:
Human capital formation helps an individual to earn more, thereby improving his quality of life.

Question 17.
State any one problem of human capital in India.
Answer:
High poverty levels

Question 18.
What is the meaning of ‘brain drain’?
Answer:
Brain drain is the large scale migration of a large group of individuals with technical skills or knowledge to a foreign country.

Question 19.
What is the meaning of economic growth?
Answer:
Economic growth means increase in the real national income of a country.

Question 20.
Why is it difficult to establish a cause and effect relationship between rate of growth in human capital formation and economic growth rate?
Answer:
Because of measurement problems it is difficult to establish cause and effect relationship between rate of growth in human capital formation and economic growth rate.

Question 21.
Discuss why human resource is considered to be the main economic factor.
Answer:
Of all the factors of production, viz. land, labour, capital and organisation; labour or human resource is the most important economic factor because it is the only factor which is active.

All the other factors are inactive. In the absence of human resource, production in an economy will come to a stand still. Therefore, it is correctly said that human resource is the main economic factor.

Question 22.
Do you think that ‘India is going to be a knowledge based economy in the near future’?
Answer:
India is soon emerging as a knowledge bank. The Indian software industry has been showing an impressive growth over the past decade. The use of e-mail, e-governance and development of information technology shows that India is slowly transforming itself into a knowledge based economy.

Question 23.
How is human development a broader term as compared to human capital? (NCERT)
Answer:
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 well-being because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices they value.

In human capital view, any investment in education and health is unproductive, if it does not enhailce output of goods and services. In the human development perspective, human beings are ends in themselves. So, human capital is a part of human development.

Question 24.
Explain how investment in education stimulates economic growth. (NCERT)
Answer:
Investment in education stimulates economic growth in the following ways

It helps to develop responsible citizens.
It helps in the development of science and technology.
It helps in the optimum utilisation of natural, physical and financial resources of a country.
It expands the mental powers of an individual.
It helps in economic development due to greater productivity and also helps to increase the standard of living.
It helps in changing social perceptions.
It also helps to control the birth rate.

Question 25.
What are the differences between human capital and human development?
Answers:
Difference between human capital and human development:

Basis	Human Capital	Human Development
Concept	It is a narrow concept.	It is a broader concept.
Means of productivity	It considers education and health as a means to increase labour productivity.	It considers that education and health are integral to human well being because only when people have the ability to read and write and the ability to lead a long and healthy life, they will be able to make other choices they value.
Link	Human capital treats human beings as a means to an end, the end being the increase in productivity.	According to the concept of human development, human beings are an end in themselves.
Welfare	In human capital, investment in education and health is unproductive if it does not enhance output of goods and services.	In human development, human welfare should be increased through investments in education and health even if such investments do not result in higher labour productivity. Thus, every individual has a right to be healthy and literate.

Question 26.
How does investment in human capital contribute to growth? (NCERT)
Answer:
Investment in human capital is believed to be positively related to economic growth. The contribution of human capital formation to economic growth can be explained as follows

Increase in labour productivity Investment in human capital through expenditure on education, health etc enhances the productivity of labour as they become physically fit and skilled in their jobs. It leads to efficient utilisation of the material inputs and capital. With increase in productivity, output increases at an increasing rate and hence economic growth accelerates.
Innovations Human capital formation helps in preparing learned scientists and researchers in various subjects who bring out innovative products, technologies and processes and thus add to the economic growth.
Capacity to adopt Advanced technology can be adopted only if the skills and knowledge required for using that technology are present in the country.

Investment in education and on-the-job training helps to create these skills and enhances the knowledge base and thus helps in absorption of new technologies which leads to higher production and thus economic growth. Thus, it is evident that human capital contributes to economic growth in various ways.

Question 27.
Trace the relationship between human capital and economic growth. (NCERT)
Answer:
Human capital is believed to be positively related to economic growth though, it is difficult to establish a relation of cause and effect from the growth of human capital to economic growth.

But we can see that human capital formation is related to economic growth in the following manner

Higher productivity of physical capital Human capital increases productivity of physical capital as specialised and skilled workers can handle machines or techniques better than the unskilled workers. This increased productivity and production leads to economic growth.
Innovatives skills Human capital facilitates innovation of new methods and techniques of production and this increases the rate of economic growth in the form of increase in GDP.
Higher rate of participation and equality Human capital formation leads to a higher employment rate. With increase in employment, the productivity rises. Also, increase in employment opportunities increases the level of income and this helps in reducing inequalities of wealth.
Brings positive outlook The process of human capital formation brings a positive outlook to the society which is different from orthodox and traditional ways of thinking, hence it increases the rate of participation in the workforce leading to an increase in the level of production and GDP.

Question 28.
What are the main problems of human capital formation in India? (NCERT)
Answer:
The main problems of human capital formation in India are as follows
(i) Rising population Rapidly rising population adversely affects the quality of human capital in under developed and developing countries like India.
It reduces per head availability of existing facilities like sanitation, employment, drainage, water system, housing, hospitals, education, food supply, nutrition, roads, electricity etc.

(ii) Brain drain Migration of highly skilled labour to foreign countries is termed as ‘brain drain’. This slows down the process of human capital formation in the domestic economy.

(iii) Inefficient of manpower planning There is inefficient manpower planning in less developed countries where no efforts have been made either to raise the standard of education at different stages or to maintain the demand and supply of technical labour force. It is a sad reflection on the wastage of human power and human skill.

(iv) Long-term process The process of human development is a long-term policy because skill formation takes time. The process which produces skilled manpower is thus, slow. This also lowers our competitiveness in the international market of human capital.

(v) High poverty levels A large proportion of the population lives below poverty line and do not have access to basic health and educational facilities. A large section of society cannot afford to get higher education or expensive medical treatment for major diseases.

Question 29.
How is literacy different from education?
Answer:
Education is a much wider concept than literacy. Literacy refers to the ability to read and write. Education includes three parameters, viz. primary education, secondary education and higher education.

Question 30.
Why has government imposed educational cess on all union taxes?
Answer:
The Government of India levied a 2% education cess on all union taxes so that the revenue generated by the government from this provision can be spent on financing elementary education.

Question 31.
India has not been able to achieve 100% literacy rates. Why?
Answer:
India has not been able to achieve 100% literacy because the government’s expenditure on education was inadequate.

Question 32.
What are the indicators of educational achievements in a country? (NCERT)
Answer:
The indicators of educational achievements in a country are

Adult literacy level
Primary education completion rate
Youth literacy rate

Question 33.
The per capita education expenditure is only ₹ 3,600 in Bihar. What do you infer from this?
Answer:
Such a low per capita education expenditure conveys that the Bihar Government is not dedicated to the cause of education in their state. Due to this literacy levels are low in Bihar.

Question 34.
Give the full form of NSSO.
Answer:
National Sample Survey Organisation

Question 35.
Discuss the role of education in human capital formation.
Answer:
Education is very essential for human capital formation. It is the most effective way of enhancing and enlarging the productive workforce of the country. The benefits of education far exceed the cost of education and the difference between the two is the value of human capital formation.

Question 36.
How is the government expenditure on education expressed? According to you, which is a better measure?
Answer:
Government expenditure on education can be expressed in two ways

Asa percentage of total government expenditure.
As a percentage of Gross Domestic Product (GDP).

The measure as a percentage of GDP is a better measure since, it sets fixed targets rather than the variable government expenditure.

Question 37.
Explain the meaning of vocationalisation of education.
Answer:
To relate education with work, the government now lays stress to provide vocational education, at ‘plus 2’ level, specially to children in rural areas and to girl child. Practical knowledge of a specific work is given to children, so that they possess necessary skills needed and are able to find employment.

Question 38.
Write a brief note on National Literacy Mission.
Answer:
In 1988, National Literacy Mission (NLM) was initiated to promote adult education. A women education council was also established to promote women education in our country. The NLM has been recast as ‘Saakshar Bharat’ with a central focus on female education. The programme covers all citizens in the age group of 15 years and above.

Question 39.
Why do we observe regional differences in educational attainment in India? NCERT
Answer:
The per capita education expenditure differs considerably across states from as high ₹ 17,000 in Himachal Pradesh to as low as ₹ 3,600 in Bihar in 2011-12. This leads to regional differences in educational attainment. The states in which per capita education expenditure is more have high literacy rates as compared to those states with less per capita education expenditure.

Question 40.
Keeping in view the present scenario, what should be the objectives of education in India?
Answer:
In view of the present scenario, the following should be the objectives of education in India

The first and foremost objective should be that of ensuring hundred per cent literacy in the country, as even after nearly 70 years of independence, around 26% of the population is illiterate.
Vocationalisation of education should be encouraged.
Higher education should be brought within the reach of all.
Adult and female education should be encouraged.

Question 41.
Do you consider that Indian education system is faulty from the employment angle?
Answer:
Yes, I agree with this statement. Indian education system is largely irrelevant to the needs of Indian economy. There is no linkage between education and employment opportunities.

After completing their school and college education, for a number of years, men and women remain unemployed because they do not have practical training and useful skills. Most of the students do not gain any occupational and vocational training. Hence, the Indian education system is considered faulty from the employment angle.

Question 42.
The current level of education expenditure is inadequate. Do you agree?
Answer:
Yes, the current level of education expenditure is inadequate. It is only 3.25% in comparision to the desired level of 6% of GDP. More than 50 years ago, the education commission has recommended that atldast 6% of GDP should be spent on education, so as to make a noticeable rate of growth in educational achievements.

However, the investment in education expenditure has not been uniform and is marked with regional and gender inequalities. India has also not been able to achieve the objective of providing free and compulsory education to all children in the age group of 6 to 14 years.

Question 43.
Discuss the role of education in the economic development of a nation.
Answer:
Following points show that education plays a significant role in economic development

Education increases the receptivity of people to modern and scientific ideas. Thus, education increases the efficiency of people.
It results in greater awareness of available opportunities and mobility of labour.
It imparts to people knowledge, skills and attitude which would enable them to contribute to the productive programmes.
It produces skilled and trained personnel needed by the economy. Education prepares individuals as human resources.

Question 44.
The Education Commission in 1966, had recommended that atleast 6% of GDP should be spent on education in India. However, the government continues to spend 3-4% of GDP on education. How has this affected the education sector in India?
Answer:
Government’s unwillingness to spend 6% of GDP on education has affected this sector adversely, as is enumerated with the help of given statistics

In India, about 30.3 crore people are still illiterate.
The female literacy rate is 65.46%, which is quite low as compared to male literacy rate of 82.14 per cent.
There is disparity in education levels of urban and rural areas.

Question 45.
How do government organisations facilitate the functioning of schools and hospitals in India? (NCERT)
Answer:
The following government organisations facilitate the functioning of schools and hospitals in India

National Council of Educational Research and Training (NCERT) This body is engaged in developing content and text books upto the level of senior secondary.
University Grants Commission (UGC) It is the apex body for controlling the working of various universities in the country. It provides funding to the universities and formulates rules and regulations regarding higher education in the country.
All India Council of Technical Education (AICTE) This body formulates and enforces rules and regulations related to technical (engineering) education in India.
Indian Council of Medical Research (ICMR) This body formulates and enforces rules and regulations related to medical education in India. It also regulates the health sector.

Question 46.
Education is considered to be an important input for the development of a nation. How? (NCERT)
Answer:
Education is the process of teaching, training, learning, imparting knowledge and developing skills. Because of education the citizens become responsible. It facilitates the use of natural and human resources.

Following points are describing why education is an important input for the development of a nation

Knowledge and skills A better educated person has greater skills and knowledge which enhances productivity and therefore provides a greater opportunity to work and earn higher income.
Rationality Education develops thinking process in people and helps them in making rational choices which lead to efficient utilisation of resources resulting in higher productivity.
Values and ethics Education inculcates moral values and professional ethics in people, making them law abiding citizens, who contribute towards the well being of the nation.
Adoption of modem technology Education develops the skills required for understanding and adopting modern technology. This helps in increasing output and growth of the nation.
Reduction in income inequality Education enhances the income earning capacity of people from economically backward sections of the country and thus reduces the inequalities in the distribution of income.
Standard of living Education raises the living standard of people by enhancing their earning capacity.
Participation rate Education makes a greater proportion of population capable of participating in the economic, social and political activities of a nation thus raising the participation of people in the development process.

Question 47.
Discuss the need for promoting women’s education in India. (NCERT)
Answer:
Women have always been neglected when it comes to education in India. The access to education has always been biased towards male population due to our social system which is patriarchal. The lack of education has caused exploitation of women and has resulted in a lower social status of women in India.
There is an imminent need or promoting female education in India, because of the following reasons

Women education is essential for providing them economic independence and empowering them to save them from exploitation and domestic violence.
Women education is essential in order to raise the social status of women, so that the quality of life of women can be improved.
Educating woman helps in promoting family welfare programmes and thus, in population control.
Educated woman are aware of the importance of healthcare and thus, take proper care of their family members contributing in human capital formation.
Educating a woman means educating a family. An educated woman can inculcate moral values in her children and can facilitate their education.

Question 48.
Argue in favour of the need for different forms of government intervention in education and health sectors. (NCERT)
Answer:
There is a need for different forms of government intervention in education and health sectors due to the following reasons

Private sector is governed by profit motive and hence does not provide education and health facilities at a reasonable cost which may be affordable to all.
Standard of education and health needs to be maintained in order to develop human resources effectively and government intervention is needed for this.
Education and health is essential for social upliftment of backward and weaker sections of the society and government intervention in terms of policy and provision of infrastructure is required in education as well as health sector.
Regional disparities are prevalent in education and health in India which can be corrected only through government intervention at all levels as private sector would not be forthcoming for establishing schools or hospitals in remote or backward areas.

Question 49.
Why does a skilled worker like a software professional generates more income than an unskilled worker?
Answer:
A skilled worker generates more income than an unskilled worker mainly because the productivity of an educated and skilled person is higher than an unskilled one. A skilled worker also commands higher earnings and gainful employment. This is because they cannot be substituted easily because, it takes years to generate a manpower which is skilled in a particular field. On the other hand, an unskilled worker like a rickshaw puller can be easily substituted and such workers easily compromise on lesser earnings.