The way the country can turn physical resources like land into Physical Capital like Factories, similarly it can turn human resources like Students into Engineers and doctors. Society needs sufficient Human Capital in the first place in the form of competent people who are educated and trained as Professionals. The country has to invest in human capital to produce more Human Capital.

1. Human Capital and Human Development

• Human Capital considers Education and Health as a means to increase labour productivity.
• Human development is based on the idea that education and health are integral parts of human well-being because only well-being people can be productive.
• Human capital is treated as a means to an end, the end being the increase in productivity. In this way, any investment in education and health is unproductive if it does not enhance the output of goods and services.
• From a Human development perspective, human beings end in themselves.
• Human welfare should be increased through investments in education and health even if such investments do not show in labour productivity.
• So, basic education and basic healthcare are important themselves irrespective of their contribution to Productivity.
• Every Individual has a right to get basic education and basic health care, that is every individual has a right to be literate and lead a healthy life.

2. State of Human Capital Formation

• Education and health are very important sources of human capital formation.
• Expenditures on education and health make substantial long-term impacts and they cannot be easily reverted hence government intervention is essential.
• When health and education are basic rights of the citizens, then the government must provide education and health, especially for the people who are an oppressed class.
• Growth in Government expenditure on education.

The expenditure of government can be expressed in two ways.

1. Percentage of total government expenditure-It indicates the importance of education in the scheme of things before the government
2. Percentage of gross Domestic Product (GDP)-How much of our income is being committed to the development of education in the country

• Elementary education takes a major share of total education expenditure and the share of higher education is the least.
• The Tapas Majumdar Committee in 1998 estimated an expenditure of 1.37 lakh crore over 10 years to bring all the Indian children age group between 6-14 under the purview of School Education.
• In 2009, the Government of India enacted the Right to Education Act to make free education a fundamental right of all children in the age group 6-14 years.
• The government has started levying 2% as an education cess on all Union Taxes, the revenues from the education cess are earmarked for spending on elementary education.
• Directive Principles of State Policy states that the Government should provide free and compulsory education for all children up to the age of 14.

3. Labour Force Participation Rate (LFPR)

The Labour force participation rate is an estimate of an economy's active workforce. The number of people ages 16 and 64 who are working or looking for employment is called the Labour force participation rate (LFPR).

• It is an important metric when the economy is not growing or witnessing a recession.
• It is a measure undertaken to evaluate the working-age population in an economy.
• Participation rate estimates the total number of people who are currently employed or looking for employment.
• People who are not looking for a job like students, aged people, and housewives are not part of the working population.

Recent Trends in LFPR

• A statewide analysis of LFPR in March 2016 and March 2022 shows that only one state, Rajasthan, recorded an overall increase in the working population.
• Southern states like Tamil Nadu and Andhra Pradesh, which had the highest LFPR in March 2016, recorded the sharpest drop.
• The share of the population that participated in the economy either by working or looking for work dropped by 6 % in 2022, the decline was more in urban areas as LFPR slipped by 7% points.
• Apart from Rajasthan, all states recorded a decline in 2022.
• In rural areas, between March 2016 and March 2022, only two states have shown an increase in LFPR -Rajasthan, and Gujarat.
• In Urban areas, between March 2016 and March 2022, four States/UTs have shown an increase in LPR-Chandigarh, Rajasthan, Haryana, and J&K.