India is faced with many problems of human capital formation. These are as follows:
(i) Rising Population: The rising population exerts pressure on the available limited resources. In other words, it reduces the per head availability of facilities like housing, sanitation, education, power supply, etc. So, the pressure on these facilities retards the quality of life and lowers the capacity to acquire specialized skills and knowledge.
(ii) Brain Drain: People migrate from one place to another in search of better job opportunities and handsome salaries. This puts a serious threat to the process of human capital formation. It leads to the loss of quality people like doctors, engineers, etc. who have high caliber and are rare in a developing country. The cost of such loss of quality human capital is very high.
(iii) Improper Man Power Planning: India lacks in proper man power planning. No major efforts have been taken to maintain the demand-supply balance of the rising labor force. So, it leads to the wastage and misallocation of human skills.
(iv) Low Academic Standards: In order to spread education, various educational institutions are opening up regardless of deficiency in their standards. These institutions impart inferior quality of education and skills and that in turn causes deficiency in the productivity and efficiency. This is one of the important hindrances for the development of quality human capital formation.