ECONOMICS PROJECT ON

Role of Education in Human Capital Formation

Hidayatullah National Law University

Raipur, Chhattisgarh
Submitted to:

Miss. Eritriya Roy

(Assistant Professor, Economics)
Submitted by:

Anamika Ballewar
Roll No.-12, Section B, Semester- II, B.A.L.LB. (Hons.)

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TABLE OF CONTENTS
1. Certificate of Declaration....... 03
2. Acknowledgment..........................................................................04
3. Introduction......05
4. Objectives..06
5. Research Methodology............................................................................07
6. Meaning of Human Capital Formation..08
7. Role of Education in a Society. ...........10
8. Role of Education in Human Capital Formation in India....13
9. Conclusion.................................................................................................15
10. Bibliography......16

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Certificate of Declaration
I hereby declare that the project work entitled Role of Education in Human Capital Formation
submitted to HNLU, Raipur, is record of an original work done by me under the able guidance of
Miss. Eritriya Roy, Faculty Member, Economics, HNLU, Raipur.

Anamika Ballewar
Roll No. 12, Section- B
SEM-II
B.A.L.LB. (Hons.)

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Acknowledgements
I feel highly elated to work on the topic Role of Education in Human Capital Formation.
The practical realization of this project has obligated the assistance of many persons. I
express my deepest regard and gratitude for Miss. Eritriya Roy, Faculty of Economics.
Her consistent supervision, constant inspiration and invaluable guidance have been of
immense help in understanding and carrying out the nuances of the project report.

I would like to thank my family and friends without whose support and encouragement,
this project would not have been a reality.

I take this opportunity to also thank the University and the Vice Chancellor for providing
extensive database resources in the Library and through Internet.

Some printing errors might have crept in, which are deeply regretted. I would be grateful
to receive comments and suggestions to further improve this project report.

Anamika Ballewar
Semester II
Section B

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Introduction
The one facet that has played a significant role in the evolution of mankind in mans capacity to
assimilate and store knowledge. Just as a country can turn physical resources like land into physical
capital like factories, similarly it can also turn human resources like students into engineers and
doctors. Societies need sufficient human capital in the first place-In the form of competent people
who have themselves been educated and trained as professors and other professionals. This means
that we need investment in human capital out of human resources.
Human capital is a collection of resourcesall the knowledge, talents, skills, abilities, experience,
intelligence, training, judgment, and wisdom possessed individually and collectively by
individuals in a population. These resources are the total capacity of the people that represents a
form of wealth which can be directed to accomplish the goals of the nation or state or a portion
thereof.

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Objectives
The main objective of the project is to understand the Role of Education in Human Capital
Formation and the sub-objectives of the projects are:

To understand the meaning of Human Capital formation and the ways in which it can be
done.

To understand the current education scenario.

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Research Methodology:
This project work is descriptive & analytical in approach. It is largely based on the analysis of
Role of Education in Human Capital Formation. Books & other references as guided by faculty
of economics were primarily helpful for the completion of this project.

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Meaning of Human Capital Formation

Human

capital is

the

stock

of knowledge, habits, social and personality attributes,

including creativity, embodied in the ability to perform labor so as to produce economic value.
Alternatively, Human capital is a collection of resourcesall the knowledge, talents, skills,
abilities, experience, intelligence, training, judgment, and wisdom possessed individually and
collectively by individuals in a population. These resources are the total capacity of the people that
represents a form of wealth which can be directed to accomplish the goals of the nation or state or
a portion thereof.
It is an aggregate economic view of the human being acting within economies, which is an attempt
to capture the social, biological, cultural and psychological complexity as they interact in explicit
and/or economic transactions. Many theories explicitly connect investment in human capital
development to education, and the role of human capital in economic development, productivity
growth, and innovation has frequently been cited as a justification for government subsidies for
education and job skills training.
"Human capital" has been and continues to be criticized in numerous ways. Michael Spence offers
signaling theory as an alternative to human capital. Pierre Bourdieu offers a nuanced conceptual
alternative to human capital that includes cultural capital, social capital, economic capital, and
symbolic capital. These critiques, and other debates, suggest that "human capital" is a reified
concept without sufficient explanatory power.
It was assumed in early economic theories, reflecting the context, i.e., the secondary sector of the
economy was producing much more than the tertiary sector was able to produce at the time in most
countries to be a fungible resource, homogeneous, and easily interchangeable, and it was referred
to simply as workforce or labor, one of three factors of production (the others being land, and
assumed-interchangeable assets of money and physical equipment). Just as land became
recognized as natural capital and an asset in itself, and human factors of production were raised
from this simple mechanistic analysis to human capital. In modern technical financial analysis,
the term "balanced growth" refers to the goal of equal growth of both aggregate human capabilities
and physical assets that produce goods and services.
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The assumption that labour or workforces could be easily modelled in aggregate began to be
challenged in 1950s when the tertiary sector, which demanded creativity, begun to produce more
than the secondary sector was producing at the time in the most developed countries in the world.
Accordingly much more attention was paid to factors that led to success versus failure where
human management was concerned. The role of leadership, talent, even celebrity was explored.
Today, most theories attempt to break down human capital into one or more components for
analysis usually called "intangibles". Most commonly, social capital, the sum of social bonds and
relationships, has come to be recognized, along with many synonyms such as goodwill or brand
value or social cohesion or social resilience and related concepts like celebrity or fame, as distinct
from the talent that an individual (such as an athlete has uniquely) has developed that cannot be
passed on to others regardless of effort, and those aspects that can be transferred or
taught: instructional capital. Less commonly, some analyses conflate good instructions for health
with health itself, or good knowledge management habits or systems with the instructions they
compile and manage, or the "intellectual capital" of teams a reflection of their social and
instructional capacities, with some assumptions about their individual uniqueness in the context in
which they work. In general these analyses acknowledge that individual trained bodies, teachable
ideas or skills, and social influence or persuasion power, are different.
Management accounting is often concerned with questions of how to model human beings as
a capital asset. However it is broken down or defined, human capital is vitally important for an
organization's success (Crook et al., 2011); human capital increases through education and
experience. Human capital is also important for the success of cities and regions: a 2012 study
examined how the production of university degrees and R&D activities of educational institutions
are related to the human capital of metropolitan areas in which they are located.
In 2010, the OECD (the Organization of Economic Co-operation and Development) encouraged
the governments of advanced economies to embrace policies to increase innovation and knowledge
in products and services as an economical path to continued prosperity. International policies also
often address human capital flight, which is the loss of talented or trained persons from a country
that invested in them, to another country which benefits from their arrival without investing in
them.

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Studies of structural unemployment have increasingly focused on a mismatch between the stock
of job-specific human capital and the needs of employers. In other words, there is increasingly a
recognition that human capital may be specific to particular jobs or tasks and not general and
readily transferable. Recent work has attempted to improve the linkages between education and
the needs of the labor market by linking labor market data to education loan pricing.

Role of Education in a Society

Education, has a great social importance especially in the modern, complex industrialized
societies. Philosophers of all periods, beginning with ancient stages, devoted to it a great deal of
attention.
Accordingly, various theories regarding its nature and objective have come into being. Let us now
examine some of the significant functions of education.
1. To complete the socialization process.
The main social objective of education is to complete the socialization process. The family gets
the child, but the modern family tends to leave much undone in the socialization process. The
school and other institutions have come into being in place of family to complete the socialization
process.
Now, the people fell that it is the schools business to train the whole child even to the extent of
teaching him honesty, fair play, consideration for others and a sense of right and wrong.
The school devotes much of its time and energy to the matter such as co-operation, good
citizenship, doing one's duty and upholding the law.
Directly through text books and indirectly through celebration of programs patriotic sentiments
are intimates and instilled. The nation's past is glorified, its legendary heroes respected, and its
military ventures justified.

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(2) To transmit the central heritage:

All societies maintain themselves, by exploitation of a culture. Culture here refers to a set of beliefs
and skills, art, literature, philosophy, religion, music etc. that are not carried through the
mechanism of heredity. They must be learned.
This social heritage (culture) must be transmitted through social organizations. Education has this
function of cultural transmission in all societies. It is only at the under leaves of the school that
any serious attempt has been, or now is, made to deal with this area.
(3) for the formation of social personality
Individual must have personalities shaped or fashioned in ways that fit into the culture. Education,
everywhere has the function of the formation of social personalities.
Education helps in transmitting culture through proper molding of social personalities. In this way,
it contributes to the integration, to survive and to reproduce themselves.
(4) Reformation of Attitudes:
Education aims at the reformation of attitudes wrongly developed by children already. For various
reasons the child may have absorbed a host of attitudes, beliefs and disbeliefs, loyalties and
prejudices, jealously and hatred etc. these are to be reformed.
It is the function of education to see that unfounded beliefs, illogical prejudices and unreasoned
loyalties are removed from the child's mind, though the school has its own limitations in this
regard, it is expected to continue its efforts in reforming the attitudes of the child.
(5) Education for occupational placement:
An instrument of livelihood. Education has a practical and also it should help the adolescent for
earning his livelihood. Education has come to be today as nothing more than an Instrument of
livelihood. It should enable the student to take out his livelihood.

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Education must prepare the student for future occupational positions, the youth should be enabled
to play a productive role in society. Accordingly, great emphasis has been placed on vocational
training.
(6) Conferring of Status:
Conferring of status is one of the most important function of education. The amount of education
one has, is correlated with his class position. This is four in U.S.A., U.S.S.R., Japan, Germany and
some other societies.
Education is related to one's position in the stratification structure in two ways. (1) An evaluation
of one's status is partially decided by what kind of education one has received and (2) Many of the
other important criteria of class position such as occupation, income and style of life are partially
the result of the type and amount of education one has had.
Men who finish college, for example, earn two and a half times as much as those who have a
grammar school education.
(7) Education encourages the spirit of competition:
The school instills co-operative values through civic and patriotic exhortation or advice. Yet the
schools main emphasis is upon personal competition. For each subject studied the child is
compared with the companies by percentage of marks or rankings.
The teacher admires and praises those who do well and frowns upon those who fail to do well. The
schools ranking system serves to prepare for a later ranking system. Many of those who are
emotionally disappointed by low ranking in the school are thereby prepared to accept limited
achievement in the larger world outside the school.

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Role of Education in Human Capital Formation in India

Education in India is provided by the public sector as well as the private sector, with control and
funding coming from three levels: central, state, and local. Under various articles of the Indian
Constitution, free and compulsory education is provided as a fundamental right to children
between the ages of 6 and 14.
India has made progress in terms of increasing the primary education attendance rate and
expanding literacy to approximately three-quarters of the population in the 7-100 age group, by
2011. India's improved education system is often cited as one of the main contributors to
its economic development. Much of the progress, especially in higher education and scientific
research, has been credited to various public institutions.
At the primary and secondary level, India has a large private school system complementing the
government run schools, with 29% of students receiving private education in the 6 to 14 age
group. Certain post-secondary technical schools are also private. The private education market in
India had a revenue of US$450 million in 2008, but is projected to be a US$40 billion market.
As per the Annual Status of Education Report (ASER) 2012, 96.5% of all rural children between
the ages of 6-14 were enrolled in school. This is the fourth annual survey to report enrollment
above 96%. Another report from 2013 stated that there were 229 million students enrolled in
different accredited urban and rural schools of India, from Class I to XII, representing an increase
of 2.3 million students over 2002 total enrollment, and a 19% increase in girl's enrollment. While
quantitatively India is inching closer to universal education, the quality of its education has been
questioned particularly in its government run school system. Some of the reasons for the poor
quality include absence of around 25 percent of teachers everyday. States of India have introduced
tests and education assessment system to identify and improve such schools.
It is important to clarify that while there are private schools in India, they are highly regulated in
terms of what they can teach, in what form they can operate (must be a non-profit to run any
accredited educational institution) and all other aspects of operation. Hence, the differentiation of
government schools and private schools can be misguiding.

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In India's education system, a significant number of seats are reserved under affirmative
action policies

for

the

historically

disadvantaged Scheduled

Castes

and

Scheduled

Tribes and Other Backward Classes. In universities, colleges, and similar institutions affiliated to
the federal government, there is a minimum 50% of reservations applicable to these disadvantaged
groups, at the state level it can vary. Maharashtra had 73% reservation in 2014, which is the highest
percentage of reservations in India.

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Conclusion
Education plays a very significant role in Human Capital Formation. Education, has a great social
importance especially in the modern, complex industrialized societies. Philosophers of all periods,
beginning with ancient stages, devoted to it a great deal of attention.
"Human capital" has been and continues to be criticized in numerous ways. Michael Spence offers
signaling theory as an alternative to human capital. Pierre Bourdieu offers a nuanced conceptual
alternative to human capital that includes cultural capital, social capital, economic capital, and
symbolic capital. These critiques, and other debates, suggest that "human capital" is a reified
concept without sufficient explanatory power.

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Bibliography/Webliography
1. www.wikipedia.org
2. www.jstor.org
3. www.ssrn.com
4. www.preservearticles.com
5. http://onlinelibrary.wiley.com/doi/10.1093/ei/cbg016/abstract
6. Economic and political weekly

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