What Is Human Capital?

Human capital is the stock of skill, knowledge, good health and training embodied in people, which raises their ability to produce.

Just as a country can turn a physical resource like land into physical capital such as a factory, it can also turn its human resources, ordinary people like students, farmers and nurses, into human capital, that is, skilled and qualified people such as engineers and doctors. The conversion happens through investment: money and effort spent on education and training transform human resources into a more productive form.

An important point is that human capital is needed to create more human capital. A society first needs competent, already-trained people, professors and other professionals, to educate and train the next generation. In other words, we use existing human capital to produce fresh human capital out of the available human resources.

To understand the idea more fully, the chapter takes up four questions:

• What are the sources of human capital?
• Is there a link between human capital and a country's economic growth?
• Is the building of human capital connected to the all-round progress of people, now called human development?
• What part can the government play in forming human capital in India? …