NCERT Explained: Class IX Economics, Chapter 2 - People as Resource: Investing in Human Capital

Introduction to the Topic

In the study of economics, we often focus on natural resources like land, minerals, and water, or physical resources like machinery, buildings, and technology. However, the most vital resource a nation possesses is its people. NCERT Class IX Economics, Chapter 2, 'People as Resource', introduces us to the transformative idea that a population is not a liability or a burden, but a powerful productive asset. When we invest in people through education, medical care, and training, we perform Human Capital Formation.

This chapter shifts our perspective from viewing a large population as a problem (in terms of providing food, clothing, and shelter) to viewing it as an opportunity. 'People as Resource' refers to a country’s working population in terms of their existing productive skills and abilities. Like any other resource, the human resource can be developed to contribute significantly to the Gross National Product (GNP). This blog post will delve deep into how investments in human capital lead to higher productivity, better income, and a more robust national economy.

Key Concepts Explained

1. What is Human Capital?

Human capital is the stock of skill and productive knowledge embodied in a population. While 'Physical Capital' refers to the machines and tools used in production, 'Human Capital' is the intelligence and health that allow those machines to be operated effectively. In many ways, human capital is superior to other resources like land and physical capital. Why? Because land and capital cannot become useful on their own; they require the human touch, knowledge, and effort to produce value.

Investment in human capital (through education, training, and medical care) yields a return just like investment in physical capital. This can be seen directly in the form of higher incomes earned because of higher productivity of the more educated or the better-trained persons, as well as the higher productivity of healthier people.

2. The Virtuous and Vicious Cycles

The chapter illustrates the impact of investment in humans through the concepts of virtuous and vicious cycles. A Virtuous Cycle is created by educated and healthy parents who recognize the value of education and health. They invest more heavily in their children’s education and take better care of their health, leading to a generation that is even more productive. This was seen in the case of Japan, a country that has almost no natural resources but is wealthy because it invested heavily in its people.

Conversely, a Vicious Cycle may be created by disadvantaged parents who, themselves uneducated and lacking in hygiene, keep their children in a similarly disadvantaged state. This traps families and communities in a loop of poverty and low productivity. Breaking this cycle requires state intervention and social reforms to prioritize human development.

3. Case Studies: Sakal and Vilas

To make these concepts relatable, the NCERT textbook provides two contrasting stories of boys living in the same village, Seemapuri:

• The Story of Sakal: Sakal was a healthy boy whose parents invested in his education. He completed a vocational course in computers and landed a job in a private firm. His productivity increased, he designed a new software, and his boss rewarded him with a promotion. Sakal became an asset to his family and the economy.
• The Story of Vilas: Vilas, on the other hand, lost his father early. His mother sold fish to earn a living. Vilas became a patient of arthritis and could not afford medical treatment or schooling. He ended up selling fish like his mother, earning a meager income. Vilas remained a liability in terms of economic contribution.

These stories highlight that while Sakal added value to the economy through his skills, Vilas could not, simply because of a lack of initial investment in his health and education.

4. Economic Activities by Men and Women

People engage in various activities to earn a living. These are classified into three main sectors:

• Primary Sector: Includes activities related to natural resources, such as agriculture, forestry, animal husbandry, fishing, poultry farming, and mining.
• Secondary Sector: Includes manufacturing and construction, where raw materials are processed into finished goods.
• Tertiary Sector: Also known as the service sector, it includes trade, transport, communication, banking, education, health, tourism, and insurance. This sector provides services that support the primary and secondary sectors.

Economic activities have two parts: Market Activities (performed for pay or profit, like a teacher in a school) and Non-Market Activities (production for self-consumption, like a farmer growing wheat for his own family or a homemaker performing domestic chores). Traditionally, there has been a division of labor between men and women in India, where women generally look after domestic chores and men work in the fields. Interestingly, when women enter the labor market after receiving education and skills, their earning potential becomes equal to that of men.

5. The Quality of Population

The growth rate of a country depends on the quality of its population. This quality is determined by two major factors: Education and Health.

Education

Education contributes towards the growth of society. It enhances the national income, cultural richness, and increases the efficiency of governance. The Indian government has taken several steps to promote education:

• Sarva Shiksha Abhiyan: A significant step towards providing elementary education to all children in the age group of 6–14 years.
• Mid-day Meal Scheme: Implemented to encourage attendance and retention of children in schools and improve their nutritional status.
• Navodaya Vidyalayas: Special schools established in each district for talented children in rural areas.
• Bridge Courses and Back-to-School Camps: Initiatives to increase the enrollment in elementary education.

Health

An unhealthy person becomes a liability for an organization. Health is an indispensable basis for realizing one’s well-being. The National Health Policy of India aims at improving the accessibility of healthcare, family welfare, and nutritional service with a special focus on the underprivileged segment of the population. Indicators of health improvement include:

• Increase in Life Expectancy: Which has risen to over 69 years in India.
• Decrease in Infant Mortality Rate (IMR): The death of a child under one year of age.
• Decrease in Birth Rates and Death Rates: Signifying better control over population growth and health hazards.

6. Unemployment: A Challenge to Human Capital

Unemployment is said to exist when people who are willing to work at the going wages cannot find jobs. It is a waste of manpower resource and tends to increase economic overload. The chapter discusses three types of unemployment:

• Seasonal Unemployment: Occurs when people are not able to find jobs during some months of the year (common in agriculture).
• Disguised Unemployment: Occurs when more people are employed than are actually needed. For example, if a field requires five people but eight are working, those three \textra people are 'disguisedly unemployed' because their removal would not affect the total production.
• Educated Unemployment: A common phenomenon in urban areas where youth with matriculation, graduation, and post-graduation degrees are unable to find jobs.

Unemployment leads to a feeling of hopelessness among the youth. It also implies that the investment made in their education is not being utilized, leading to a loss for the entire economy.

Summary & Key Takeaways

• People as an Asset: A population is a resource to be nurtured, not a problem to be solved.
• Human Capital Formation: Investment in education and health converts a human being into 'human capital,' which is more productive and earns higher income.
• Sectors of Economy: Activities are divided into Primary (\textraction), Secondary (manufacturing), and Tertiary (services).
• Determinants of Quality: Literacy rate and life expectancy define the quality of the population and, consequently, the strength of the nation.
• Unemployment Issues: Seasonal, disguised, and educated unemployment are the main hurdles in the effective utilization of human resources in India.
• Government Role: Schemes like Sarva Shiksha Abhiyan and the National Health Policy are crucial for improving human capital.

By understanding that 'People are Resource,' we realize that every individual has the potential to contribute to the nation's progress. The key lies in providing equal opportunities for education and healthcare to all, ensuring that every citizen can transition from being a potential liability to a valuable asset.