Human capital refers to stock of ‘skill and expertise’ embodied in humans. Human capital formation is the process of adding to stock of human capital over time. Human capital can be developed through creation of skilled, trained and efficient labour force by providing better education, health care facilities, etc.

According to Harbison, the human capital formation indicates, “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.

Sources of Human Capital Formation. Education investment is recognised as one of the main sources of human capital along with other sources like health, migration, on-job training, and information.

Physical development involves growth and changes in the body and brain, the senses, motor skills, and health and wellness. Cognitive development involves learning, attention, memory, language, thinking, reasoning, and creativity. Psychosocial development involves emotions, personality, and social relationships.

Human development is defined as the process of enlarging people’s freedoms and opportunities and improving their well-being. Human development is about the real freedom ordinary people have to decide who to be, what to do, and how to live. The human development concept was developed by economist Mahbub ul Haq.

The first UNDP Human Development Report published in 1990 stated that: “The basic objective of development is to create an enabling environment for people to enjoy long, healthy and creative lives.” It also defined human development as “a process of enlarging people’s choices”, “and strengthen human capabilities” in a …