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State of Human Capital in India

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Last updated date: 19th Jul 2024
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Human Capital: A Brief Insight

The stock of knowledge, habits, personality, and social attributes epitomizes the abilities to execute various functions to produce an output of economic value- all combine to summarize the human capital meaning. Enterprises, at any point in time, strive to develop and achieve their goals and remain ingenious simultaneously. To make that happen, they invest in human capital through training and development and enable them for an upgraded level of production and quality. The theory of human capital also means the study of human resource management as per the practice of macroeconomics and business administrations. This article elucidates the significance of human capital and its related concepts.

Types of Human Capital

It is a kind of intangible quality or asset that cannot be presented as a balance sheet for the company. According to human capital, no labour is equal and the quality of the capital can be upgraded by investing in the abilities, education, and experiences of the employees.

Health – Productivity of an individual is influenced by health. An environment with a good quality of life, a better healthcare system, and a healthy lifestyle can result in more productivity.

Tacit Knowledge – knowledge that cannot be gained from books can be obtained if practiced practically.

System Thinking – The ability to analyze and identify difficult impacts associated with a situation is called system thinking.

Creativity – The ability to understand beyond the possible and think about innovative ideas that evade others.

Relational Capital – It is the relationship between people and the organization. For example, an executive manager is known by everyone in the company.

Leadership – It includes the capability of motivating and influencing the group to achieve a determined and common goal.


Human Capital Management

The set of practices an organization follows to recruit, develop, and manage its employees and increase their appraisal of the company is called human capital management. Good human capital management results in hiring the right talent, managing employees in a better way, increase in productivity and having all the required skills in the company’s workforce.


Human Capital Management Practices Include

  • Workforce planning.

  • Compensational planning.

  • Onboarding.

  • Training.

  • Payroll.

  • Performance management.

  • Retirement services.

  • Workflow management.

Human Capital Development

The process by which an organization’s resources and capabilities are improved is known as human capital development. It can range from tuition assistance to on-the-job training and team-building with a given spectrum. The manager must see to the development of the employees. The employees should be allowed to utilize and be aware of the development processes. Human capital development is very important for the productivity and development of an organization.


Human Capital Development Rotates Around

  • Talent management.

  • Performance management.

  • HR management.

  • Succession planning.

  • Workforce planning.

  • Knowledge planning.

The tools for generating these opportunities include facilitation, coaching, training, and consulting. Learning management systems are used by some companies to develop human capital development.


Human Capital Strategy

The systematic process used to identify the resource and their capabilities for meeting the organization’s goal and develop strategies and plans for fulfilling the goals is called human capital strategy.

A human capital strategy must ensure that the firm gives the correct human capital in the right job at the right time for the right cost.


Strategy Planning Includes

  1. Identifying the purpose.

  2. Select the necessary goals for accomplishing a mission.

  3. Update and monitor the plan.

  4. Identify specific strategies and approaches.

State of Human Capital in India

The importance of human capital in the development of the financial sector has been realized in India in the early stage. A specific plan is been followed by the country and the reason for such an action plan is because of:

  1. Innovative Skills – Human capital involves the invention of innovative techniques for production and it results in an increase in economic development as an increase in GDP. This boosts economic growth. 

  2. High Productivity of Capital – It boosts productivity in the capital as professional operatives and skilful measures. It functions the guidelines effectively to train operatives. As a result of this, the human capital in India is affected.

  3. Bring a Positive Viewpoint – The process of human capital brings a positive outlook for the public which is not similar to traditional mindsets. Thus, it raises the level of manufacturing production and cooperation.

Problems of Human Capital Formation in India

  • Growing Population.

  • Long-standing Process.

  • High Level of Poverty.

  • Incompetent Manpower Planning.

Did you Know?

  • The intensified productivity of every individual in a company commits substantially to the increasing labor and creating abilities for absorbing innovative technologies. 

  • Benefits of human capital include:

  • Preserving and enhancing the dignity, worth, and freedom of the labor force.

  • Improvement of the production of important services and goods.

  • Human capital is an important factor in the modernization and development of skills and technology.

  • The social aspect of human capital is to improve health, increase the literacy rate, and present a better standard of living.

Economic aspects of human capital include improved infrastructure, modern technology, industrial performance, effective planning, and the existence of capital. 

Factors Helpful in Increasing the Human Capital in India 

Hiring additional employees is an apparent approach to boost human capital. Human capital, on the other hand, isn't stagnant. Within the current workforce, few steps can be taken to strengthen it. Some of the ways which help in increasing the human capital in India are stated below:

  1. Improving Education- A workforce with a higher level of education will be able to accomplish more. You can provide industry-specific training. You can also help your staff earn college degrees or extra certifications by sponsoring them.

  2. Providing an Encouraging Work Culture- People that think creatively are more likely to innovate. It may also result in increased staff engagement. They have the ability to think outside the box and solve issues in novel ways.

  3. Specialized Niches- The more specialized someone is, the more they can concentrate on their area of genius. Rather than wasting time and money learning multiple jobs, they can focus on one area of expertise and maximize their potential.

  4. Recruiting a Diverse Workforce- When more people have a variety of life experiences, they bring a variety of skills and perspectives to the table.

FAQs on State of Human Capital in India

1. What is Human Capital and How Does it Matter to an Economy?

Human capital involves knowledge, health, and skills that people invest and gather all through their lives, making them understand their possibilities as important members of society. The key to creating an inclusive society and end extreme poverty is by investing in people by giving them education, nutrition, skills, and jobs.

Economic development and growth depend on physical capital and human capital and their productivity. Investing in such areas reinforces and complement each other. For productivity, a workplace needs capital and a stable governed economy. It also needs infrastructure and equipment. In return, this can result in a healthy workplace.

2. What is the State of Human Capital in the World Today?

Despite development over 25 years, there are still a lot of challenges, especially for developing countries:

  • There is a learning crisis in a lot of countries. Data shows that in a few countries, kids gain fewer years of education compared to other countries, despite the same given time.

  • People in rich countries spend a lot of money annually and these expenses hit the poor section of the society.

  • In some of the underdeveloped countries, there is no social safety available for a section of people leaving them exceedingly vulnerable.

3. What are the different types of human capital and how are they categorized?

Any human quality or value that can boost economic output and productivity is referred to as human capital. Quantifying these intangible assets, which cannot be isolated from individual workers, can be tough. They do, however, consistently result in improved economic performance. Human capital is mainly classified into three types which are knowledge capital, social capital, and emotional capital. A few of the examples of these three classifications have been stated below, let’s have a look at them

Knowledge Capital- The examples of knowledge capital include Intelligence Trade school education, Situational knowledge, Hard skills, Work experience, College degree, Trade school education.

Social Capital- Relationships, Fame, Social status, Professional network, Health,

Emotional Capital- Emotional capital comprises Critical thinking, Creativity, Problem-solving, Personal resilience, Loyalty, Leadership behaviors, Emotional intelligence.

4. Who started the term Human Capital and when?

Human capital is a concept coined by two economists namely Jacob Mincer and Gary Becker, who are members of the "Chicago School" of economics, in the 1950s and 1960s. The concept, on the other hand, dates back to Adam Smith, who maintained that capital is made up of "the acquired and useful abilities of all the inhabitants or members of the community," not only machinery and real estate. This concept of human abilities and education as a store of capital that can be invested to produce value was first used to analyze nations as a whole, but It progressively became an important aspect of understanding how businesses operate in an era when intellectual property and innovation are as vital as factories and land for creating value in a company.

5. What is the meaning of human capital development?

The technique of enhancing an organization's staff performance, talents, and resources is known as human capital development. Human capital development can include everything from on-the-job training to tuition help to team-building activities, and it can happen across several spectrums (in terms of quantitative and qualitative commitments), like morale-building, morale building, and project management.