Exploring the Interplay of Human Capital and Development

Human capital refers to the skills, knowledge, experience, and attributes possessed by individuals, contributing  to their productivity and economic value. In the context of India’s dynamic landscape, the process of Human development, which involves enhancing well-being and expanding choices, is intrinsically linked to ongoing initiatives in human capital formation.  Human Capital Formation approach involves investments in education, health, on-the-job training, migration, and information, collectively shaping the nation’s human capital for sustainable growth and development

Exploring Objectives: Contrast Between Human Capital and Human Development

• While the terms human capital and human development may sound alike, they have distinct meanings and implications. 
• Their differences primarily revolve around the objectives and values associated with education and health.

Nurturing Human Potential for Human Capital Formation in India 

• Human capital formation in India is primarily driven by investments in education, health, on-the-job training, migration, and information. Among these, education and health are important.
• This section delves into the education sector’s state and the necessity for government intervention in promoting human capital formation.

Examining India’s Multi-Tiered Approach to Education and Healthcare Responsibilities

• Multi-tier Governance Structure in India: India, being a federal country, has governance at union, state, and local levels (Municipal Corporations, Municipalities, and Village Panchayats) with distinct functions as outlined in the Constitution.
• Shared Responsibility for Education and Healthcare: The responsibility for expenditures on education and health is shared across all three tiers of government, aiming for a holistic development approach.

Government’s Vital Role in  Human Capital Formation: Balancing Benefits, Quality, and Accessibility in Education and Healthcare Services

• To Maximize Social and Private Benefits: Education and health services create both private and social benefits, necessitating a balance of private and public institutions in these sectors.
• Safeguarding Quality and Accessibility: Given the long-term impact and irreversible nature of investments in education and health, government intervention is crucial to ensuring quality and accessibility.
• Risks of Monopoly Power and Exploitation:
  • The lack of complete information about the quality and cost of services can lead to monopoly power and exploitation by service providers.
  • This underscores the government’s role in stipulating and enforcing standards.

Key Governance Players in India’s Education and Healthcare Sectors

• Key Players in India’s Education Sector: 
  • The union and state-level ministries of education, alongside organisations like 
  • The National Council of Educational Research and Training (NCERT), 
  • University Grants Commission (UGC), and 
  • The All India Council of Technical Education (AICTE), plays significant roles in facilitating the education sector.
• Facilitating India’s Healthcare Sector: 
  • Similarly, the health sector is facilitated by the union and state-level ministries of health, Departments of health, and 
  • Organizations like the National Medical Commission and the Indian Council for Medical Research (ICMR).

Challenges faced during  Human Capital Formation

• Obstacles to Educational  and Health Access: 
  • With a significant portion of the population living below the poverty line, many Indians cannot afford basic education and health care services.
  • The challenge extends to accessing higher education and super-speciality health care, especially for the socially oppressed classes.
• Government Commitment to Human Capital Development:
  • Both the union and state governments have been increasing expenditures in the education sector over the years.
  • This aim is to achieve full literacy and elevate the average educational attainment of Indians, reflecting a sustained commitment towards human capital formation.

Dynamics of Government Expenditure in India’s Education Sector

Government expenditure on education is a crucial aspect of human capital formation in India, evaluated in terms of its percentage of total government expenditure and its percentage of Gross Domestic Product (GDP).

• Government Expenditure Trends: The percentage of education expenditure out of total government expenditure reflects the government’s prioritization of education.
  • While the percentage of education expenditure in GDP signifies the portion of people’s income dedicated to education development.
• Historical Trend (1952-2014):  Education expenditure as a percentage of total government expenditure rose from 7.92 to 15.7.
  • Education expenditure as a percentage of GDP increased from 0.64 to 4.13.
  • The increase has been irregular, with periods of rise and fall.
• Elementary vs Tertiary Education Expenditure:  Elementary education consumes a major share of the total education expenditure.
  • In contrast, the share for higher/tertiary education is the least, though the expenditure per student at this level is higher than that of elementary education.
• Growing Need for Trained Teachers and Education Investment: An expansion in school education necessitates more trained teachers from higher educational institutions.
  • Which advocates for increased expenditure across all education levels.
• State-wise Disparity (2014-15): Per capita public expenditure on elementary education varied considerably across states, from Rs 34,651 in Himachal Pradesh to Rs 4088 in Bihar.
  • It indicates a disparity in educational opportunities and attainments.

Analysis of Education Expenditure in India and Recommendations for Future Growth

• Recommending Enhanced Education Expenditure: Various commissions recommended education expenditures of at least 6% of GDP to achieve significant growth in educational achievements.
  • The Tapas Majumdar Committee (1999): It estimated a need for around Rs 1.37 lakh crore over 10 years (1998-99 to 2006-07) to bring all Indian children aged 6-14 under school education.
• Education Expenditure Disparity: The current level of education expenditure (a little over 4% of GDP) is inadequate compared to the desired 6% of GDP, which has been accepted as a crucial goal for the upcoming years.

Fostering Change: Legislative and Fiscal Initiatives Shaping Education in India

• Right to Education: The Right of Children to Free and Compulsory Education Act (2009) was enacted to make free education a fundamental right for all children aged 6-14.
• Education Cess: A 2% ‘education cess’ on all Union taxes has been initiated to fund elementary education.
• Government Initiatives for Higher Education: Additionally, the government has sanctioned a large outlay for promoting higher education and introduced new loan schemes for students pursuing higher education.

Educational Achievements Indicators

• Educational achievements are usually indicated by (Refer to Table)
  • Adult literacy levels, 
  • Primary education completion rates, and 
  • Youth literacy rates.

Educational Attainment in India

DOWNLOAD PDF