Define 'human capital formation' and mention two major components that contribute to it in India.
Answer
Human capital formation is the process of enhancing the productive capacities of individuals through investments in health and education; the two major components are health/nutrition improvement and education/skill development.
Step-by-step solution
- State the definition: human capital formation refers to the accumulation of skills, knowledge, and health that increase workers' productivity.
- Identify the two broad investment areas that create such capital in India: (i) health and nutrition, which improve physical and mental capacity, and (ii) education and skill development, which raise knowledge and abilities.
- Summarize that these two components together constitute the major drivers of human capital formation in the Indian context.
Common mistake: Confusing human capital with physical capital or listing only one component
Concept tested: Definition and components of human capital
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