Human capital formation is “The process of acquiring and increasing the number of persons who have the skills, education and experience which are critical for the economic and the political development of the country”.
- Investment on Education : The skills and knowledge of a literate person is always more than that of an illiterate person. Investing on education not only increases the production of labour, but it also motivates to gain the power to learn new technologies which helps in the activity of the new variation.
- Investment on health : Health can rapidly increase the economic and general development of a person. People’s health is primarily effected by eating habits, balanced diet, drinking water and proper housing. Good health increases the efficiency of people.
- Migration : People sometimes migrate from one place to the other in search of better job. It includes migration of people from rural areas to urban areas in India and migration of technical personnel from India to other countries of the world. Migration in both these cases involves cost of transport, higher cost of living in the migrated places and psychic costs of living in a strange socio-cultural setup. The enhanced earnings in the new place outweigh the cost of migration. Expenditure on migration is also a source of capital formation.
- Training during task : Many types of investments are made on the training on employees of the firm, by which the employees of the firm can be sent to the other institutes for training. Also, training can motivate the employees to train other employees.
- Investment on information : Through proper information, one can know about various business opportunities present in the world. This helps in formation of human capital.
