The term human capital formation means, “The process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for the economic and the political development of the country.
Thus it is associated with investment in man and his development as creative productive resources.” Schultz observed that there are five ways of developing human resources:
(a) Health facilities and services which include all the expenditures that affect the life expectancy, strength and stamina and the vigour and utility of people.
(b) On-the job training, including old type apprenticeships organized by firms,
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(c) Formally organized education at the elementary, secondary and higher “levels.
(d) Study programmes for adults that are not organized by firms, including extension programmes notably in agriculture. His) migration of individuals and families to adjust to changing job opportunities.
Significance of Human Capital
The significance of the human capital can be assessed from the following arguments.
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1. Fetter use of Capital Goods:
Modern technology is becoming more and more complex. With the growth of science, machinery and equipment are becoming more sophisticated. Their efficient operation requires skill and technical knowledge. Therefore capital development is very significant.
2. Better use of Improved Knowledge:
Knowledge about production and management of economies is expanding at a very fast rate. The other developed countries are increasingly adopting the new methods of production and management techniques.
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In order to keep pace with this growth, it is necessary that India should increasingly provide scope for assimilation and adoption of that knowledge.
3. Modernization of Attitudes:
More important still, human resources development is required to modernize attitude of the general masses. Backward social system and primitive attitudes and beliefs cannot go along with the growth. Thus, the study of human capital is very crucial.