Human Capital as the name suggest is the quality of people living in country. Its when people in a country are used as assets rather than a liability. Physical capital includes machinery, working capital etc. Japan and South Korea are very rich in human capital. Because of their huge investment in the human capital, they are leading in technology. In terms of return they got returns too. South Korea got itself out of conflicts in 1960 when its GDP per person was lower than Ghana and in 2000 they have 17 times better GDP than Ghana. Japan, a place which has no resources at all, is a developed nation. It imports all the food products from nations like India.
We have these examples in front of us and its not that India has been ignorant in investing in Human Capital. Right in the Seventh 5 year plan, Human Resource Development was considered as the essential part for the development strategies of India. But I think It was too late to implement. In first five year plan, it was made quite clear to give education to all the children between the age of 6-14 yrs within 10 years.. Had it been implemented, India would have got a cent percent literacy rate. India had wrong priorities, rather than calling people to contribute, she contributed itself and was busy in raising the standards of living in India. Though I truly second the need for equity that time, but putting 0.4% of GDP in Education was not a good idea at all.
India started contributing in Human Capital in 7th five year plan and after that we saw radical changes in terms of declining poverty at faster rate than ever before. Diminishing difference between man and woman took place majorly after this act. Though India is far behind its target, but it surely has gained a momentum towards it.
World Bank Quotes “India has all the means to use its human capital and if she do so its per capita income can increase 3 fold by year 2020”.
Deutsche Bank “Growth in India is due to her rich human Capital and by 2020 it will become 4th largest economic power of the world”.
This was about the goodness of India. But what was there before 7th year plan that made India realize the need in improvement in investment in human capital. Its her learning from the past mistakes. Before this India had very small inconsistent decisions that led to wastage of her revenue without appropriate results. Example being rural areas desperately needing water and Indian government provided them with roads. What do they do with this road which lead to nowhere. Improper distribution of GDP was hence a major concern to the relatively slower growth when we compare it with South Korea.
To conclude I must say India, though started late, have taken some crucial steps towards improving her human capital. If Japan in absence of any resource and investing only on Human Capital can go up to the ladder, then we can seriously run up the ladder in no time. The need is proper planning and good people executing it.