This chapter explores how people, through education, health, and skills, become valuable assets to an economy. Unlike land or capital, human resources can enhance productivity by utilizing other resources efficiently. The chapter contrasts two boys, Sakal and Vilas, to illustrate the impact of investment in human capital and discusses economic activities, gender roles, education, health, and unemployment in India.
People as Resource: Human capital, unlike land or physical capital, can actively use other resources to create wealth. Educated and healthy people contribute to economic growth, benefiting both themselves and society indirectly.
Population: Asset or Liability? India’s large population was once seen as a burden but can become a productive asset through investments in education, health, and skill training, as seen in countries like Japan, which lack natural resources but thrive due to human capital.
Case Study - Sakal: Sakal, a 12-year-old from Semapur, joined school despite his family’s modest means. Supported by his parents, he completed higher secondary education and a vocational computer course via a loan. His skills led to a job in a private firm, where he designed software, boosting sales and earning a promotion.
Case Study - Vilas: Vilas, an 11-year-old from the same village, faced hardship after his father’s death. His mother, Geeta, earned Rs 150/day selling fish. Vilas, afflicted with arthritis and unable to afford treatment, dropped out of school and sold fish, earning a meager income like his mother, with no prospects for improvement.
Virtuous vs. Vicious Cycle: Investment in education and health creates a virtuous cycle, as seen with Sakal, where educated parents prioritize their children’s education and health. Conversely, Vilas’s family, lacking education and health access, remains trapped in a vicious cycle of poverty and low productivity.
Three Sectors: Economic activities are divided into:
Market vs. Non-Market Activities: Market activities (e.g., Sakal’s job, Vilas selling fish) involve payment for goods/services. Non-market activities (e.g., Vilas cooking for family) are for self-consumption and not counted in national income.
Gender Roles: Cultural norms assign women like Sheela (Sakal’s mother) to unpaid domestic chores, excluded from national income. Women like Geeta (Vilas’s mother) earn income in the labor market, but most women face low pay due to limited education and skills, working in insecure jobs without benefits like maternity leave.
Determinants: Literacy, health (measured by life expectancy), and skill formation determine population quality, driving economic growth.
Education’s Role: Education, as seen with Sakal, enhances productivity, national income, cultural richness, and governance efficiency. India’s literacy rate rose from 18% (1951) to 85% (2018), but disparities persist: males (16.1% higher than females), urban areas (14.2% higher than rural), and states like Kerala (94%) vs. Bihar (62%).
Educational Infrastructure: Primary schools expanded to 7,78,842 by 2019-20, but poor quality and high dropout rates persist. Samagra Shiksha and mid-day meals aim to improve access and retention. Higher education’s Gross Enrolment Ratio (GER) reached 27% (2020-21), with colleges growing from 750 (1950-51) to 46,007 (2020-21) and universities from 30 to 1,074.
Health’s Role: Health enables individuals to maximize potential and fight illness, boosting productivity. India’s life expectancy increased to 67.2 years (2021), infant mortality dropped from 147 (1951) to 28 (2020), birth rate to 20.0, and death rate to 6.0. Health infrastructure grew, with dispensaries/hospitals rising from 29,715 (2014) to 36,068 (2021) and nursing personnel from 2.6 million to 3.5 million.
Challenges: Only 542 medical colleges exist, concentrated in four states. Rural areas lack basic facilities, and education/health investments remain inadequate for India’s population.
Definition: Unemployment occurs when people willing to work at prevailing wages cannot find jobs. Sheela, Jeetu, and Seetu (Sakal’s family) are not unemployed, as Sheela chooses domestic work, and the children are too young (workforce: 15–59 years).
Types in India:
Impact: Unemployment wastes human resources, increases economic dependency, and lowers quality of life, leading to health decline and school dropouts. India’s low statistical unemployment rate masks underemployment, where people work in low-productivity jobs for subsistence.
Employment Trends: Agriculture, the most labor-absorbing sector, sees declining dependence due to disguised unemployment. Surplus labor shifts to secondary (small-scale manufacturing) and tertiary sectors (e.g., IT, biotechnology).
Transformation: A self-sufficient village, where families produced food and clothes, invested in education. One son became an agro-engineer, designing a plow that increased wheat yields, creating a new job and surplus for sale. Inspired, families requested a school, leading to universal education.
New Opportunities: A daughter trained in tailoring, creating another job and saving farmers’ time, boosting farm yields. This cycle of education and skill development turned the village prosperous, illustrating how human capital creates economic opportunities.
Human Capital’s Value: Education and health transform people into assets, driving economic growth, as seen in Sakal’s success and Japan’s development.
Challenges: India’s progress in literacy (85%) and health (life expectancy 67.2 years) is notable, but disparities (gender, rural-urban, state-wise) and inadequate infrastructure persist. Educated unemployment and rural underemployment require targeted policies.
Future Prospects: Expanding vocational education, improving healthcare access, and promoting tertiary sector jobs (e.g., IT) can mitigate unemployment and enhance human capital, turning India’s population into a global asset.