People as Resource — Study Notes

1. Introduction

'People as Resource' is a way of referring to the working people of a country in terms of their existing productive skills and abilities. The idea of 'people as a resource' looks at the population from the viewpoint of its productive contribution to the national economy. When the existing human resources are further developed by becoming more educated and healthy, we call it 'human capital formation'.

Human capital formation is the process by which the population becomes an asset rather than a liability. Investment in human capital, through education, health, and training, yields higher returns in the future in the form of higher output, income, and growth. This chapter explains how human capital is developed, the role of education and health, the structure of employment in India, and the problems of unemployment.

2. Economic Activities and Human Capital

2.1 Economic and Non-Economic Activities

Human activities are of two types — economic activities and non-economic activities. Economic activities are those activities that add to the national income, such as the work of a farmer, a factory worker, a doctor, or a teacher. Non-economic activities are those that do not add to the national income, such as a mother taking care of her child or a friend helping another friend. Human capital formation is about improving the productive capacity of people through investment in education, health, and training.

2.2 The Role of Human Capital

Human capital is the stock of skill and productive knowledge embodied in them. People become an asset when their education, health, and training make them more productive. The investment in human capital is made through education, health, and on-the-job training. A skilled and educated workforce is the most important resource of a nation, because it can use natural resources more efficiently and produce more goods and services.

3. Education and Health: The Building Blocks of Human Capital

3.1 Education and Human Capital

Education is the most important factor in the development of human capital. Investment in education yields a higher rate of return because an educated person can earn more, find better jobs, and contribute more to the economy. The government has taken many steps to improve education in India, including the Sarva Shiksha Abhiyan and the Right to Education Act (2009), which provides for free and compulsory education for children in the age group of 6 to 14 years.

3.2 Health and Human Capital

Health is another important component of human capital. A healthy person can work more efficiently and for a longer period. Investment in health, through clean drinking water, sanitation, nutrition, and medical care, increases the productivity of the people. The government has launched many health programmes, including the National Rural Health Mission, to improve the health of the people.

3.3 The Benefits of Human Capital Formation

Human capital formation brings many benefits. An educated and healthy population is an asset for the country, as it contributes to higher output, income, and economic growth. It also improves the quality of life of the people and helps in the reduction of poverty. The return on investment in human capital is higher than the return on investment in physical capital.

4. The Structure of Employment in India

4.1 The Three Sectors of the Economy

The economy of India is divided into three sectors: the primary sector (agriculture), the secondary sector (industry), and the tertiary sector (services). Most of the working population of India is engaged in the primary sector, especially agriculture. About 64 per cent of the people in India are engaged in agriculture and allied activities, even though agriculture contributes a much smaller share of the national income.

4.2 The Unorganised Sector

Most of the workers in India are employed in the unorganised sector, which includes small farmers, landless labourers, and workers in small industries. These workers do not have job security, and they do not get the benefits of provident fund, medical insurance, or regular wages. The government is trying to improve the conditions of the workers in the unorganised sector.

4.3 The Occupational Structure

The occupational structure of India shows the distribution of the working population across the three sectors. The primary sector employs the largest proportion of the workers, followed by the tertiary sector and the secondary sector. The composition of the working population has been changing slowly, with a gradual increase in the share of the tertiary and secondary sectors.

5. Unemployment in India

5.1 The Meaning of Unemployment

Unemployment is a situation in which people who are willing and able to work cannot find work. There are different types of unemployment in India, including seasonal unemployment (when people are without work during certain seasons of the year) and disguised unemployment (when more people are engaged in work than needed). The problem of unemployment is a serious challenge for India.

5.2 The Effects of Unemployment

Unemployment has many negative effects. It leads to wastage of human resources, and it increases the burden of the working population. Unemployment creates poverty and social problems, and it increases the dependency ratio. The youth, especially the educated youth, face the problem of unemployment, which leads to frustration and social unrest.

5.3 Solutions to Unemployment

The problem of unemployment can be solved through the creation of more job opportunities, the improvement of education and skill development, the growth of the secondary and tertiary sectors, and the expansion of self-employment opportunities. The government has launched many schemes, including the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), to provide employment to the rural poor.

Quick Revision Tables

Table 1: Economic vs Non-Economic Activities

Table 2: Human Capital Formation

Table 3: Sectors of the Economy

Mind Map

Important Diagrams (SVG)

Diagram 1: Human Capital Formation

Diagram 2: Types of Unemployment in India

Common Mistakes

1. Students often say all human activities add to the national income. Only economic activities add to the national income; non-economic activities like caring for a child do not.
2. Many believe the population is always a liability. When the population is educated and healthy, it becomes a resource or an asset.
3. A common error is to say investment in physical capital yields a higher return than investment in human capital. Investment in human capital yields a higher rate of return in the long run.
4. Students sometimes say most of India's workers are in the tertiary sector. About 64 per cent of the workers are actually engaged in the primary sector (agriculture).
5. It is wrong to say workers in the unorganised sector enjoy job security and benefits. They face job insecurity and lack of benefits like provident fund and medical insurance.
6. Many students confuse seasonal unemployment with disguised unemployment. Seasonal unemployment is time-based (no work in certain seasons), while disguised unemployment is when more people work than needed.
7. Students often forget that the Right to Education Act was passed in 2009 and provides for free and compulsory education for children aged 6 to 14.
8. Some students say unemployment only affects the uneducated. Educated youth also face unemployment, which is a serious challenge in India.

Exam Tips

1. Define 'people as resource' and 'human capital formation' clearly in your introduction.
2. Distinguish between economic and non-economic activities with examples.
3. For human capital, cover education (RTE Act 2009, Sarva Shiksha Abhiyan) and health (NRHM) with their benefits.
4. Explain the three sectors of the economy and the fact that about 64 per cent of workers are in the primary sector.
5. Define seasonal and disguised unemployment with one example each.
6. For solutions to unemployment, mention job creation, skill development, MGNREGA, and growth of the secondary and tertiary sectors.
7. Connect human capital formation to higher output, income, and the reduction of poverty in your conclusion.

Conclusion

People are the most important resource of a nation, and the idea of 'people as resource' focuses on the productive capabilities of the population. When people are educated, healthy, and skilled, they become human capital that drives the growth of the economy. Investment in education and health yields high returns, converting the population from a burden into an asset. However, the structure of employment in India, with most workers engaged in the primary sector and many in the unorganised sector, and the persistent problem of seasonal and disguised unemployment, remain serious challenges. The solution lies in better education, improved health, skill development, and the creation of more job opportunities. By investing in its people, India can turn its large population into its greatest strength and ensure a better quality of life and economic prosperity for all.