|Demand of the question
Introduction. Contextual Introduction.
Body. Need of investment in human capital. Importance of generating employment and human capital.
Conclusion. Way forward.
India has one of the youngest populations in the world(65% of our population is under 35 years of age). With India aiming to become a $5 trillion economy by 2025, it is important to focus on this demographic dividend. Human Capital means the skills, education, capacity and attributes of labour which influence their productive capacity and earning potential. It is pointed out that there is a huge shortfall of human capital in the country. Although there is increasing workforce in the country, this is a big challenge for India because there is a huge shortfall of educated, skilled and trained workforce.
Need to invest in human capital:
- Economic growth: The growth of capital stock depends extensively on the human capital formation. In the absence of adequate investment in human capital, utilisation of physical capital will be at low pace, leading to retardation of development.
- Skill gap: Human capital lack critical skills which are very much needed for the industrial sector. India has a surplus labour force but have poor skills for employment. Thus human capital formation should solve these problems by creating necessary skills and also by providing gainful employment.
- Ripple effect: Organisations across the world have recognized the importance of skilled manpower and the value it can provide despite being a little costlier. Skilled human capital provide high value for money and initiate a ripple effect in the growth of a country’s economy.
Importance of human capital quality and employment to reach $5 trillion mark:
- Employment: During the last decade, the growth rate of the labour force (2.23%) was significantly higher than the growth rate of employment (1.4%), which itself was several-fold less than the growth rate of the economy. Without employment productive labour go waste and hinders the economic growth of a national and prevent it to achieve its full growth potential.
- Innovations and Technological Improvement: A focus on human capital will lead to more innovations in the areas of production and related activities. Innovation is a must to achieve more growth.It also creates the ability to absorb new technologies.
- Higher Productivity of Physical Capital: Human capital increases labour productivity.Trained workers will use the physical capital (like machines etc.) more efficiently.
- Raises Production: Human capital formation raises production levels and leads to economic growth by adding to GDP.Knowledgeable and skilled workers can make better use of resources at their disposal.
- High Rate of Participation and Equality: By improving productive measures of the labour force, human capital formation increases excellent employment.This leads to a high rate of participation in the labour force. It reduces the gap between poor and rich. Further, women participation is a must if India has to achieve $5 trillion economic goal, that demand focus on women’s employment.
- Improves the Quality of life: Quality of life is indicated by income and health.Income and health depend upon the level of education, skill formation, etc.Human capital formation increases these skills and improves the quality of life of the masses.Better quality of population means more economic growth.
- Skill development: It is important to upgrade skills to international standards through significant industry involvement and develop necessary frameworks for standards, curriculum and quality assurance. The skill development scheme needs to be well coordinated and properly dovetailed to have an effective and efficient mechanism to fulfill the requirement.
- Vocational training: Vocational training should be imparted by ministries and department of government. This would help them in gaining required technical skills for the industry.
- Private sector involvement: Effort must be made to enhance, support and coordinate private sector initiatives for skill development through appropriate Public-Private Partnership (PPP) models. Thus, striving for significant operational and financial involvement from the private sector.
- Social upliftment: Focus on underprivileged sections of society and backward regions of the country thereby enabling to move out of poverty is needed. Similarly, focus significantly on the unorganised or informal sector workforce.
The government of India is taking initiative to fill the existing skill gap through skill development mission in order to leverage its position to fulfill domestic and global requirements and at the same time fulfilling its domestic requirement of the skilled labor force. Skilling would enhance human capital quality needed to reap the demographic dividend which might turn into demographic disaster.