Economics

(a) Human Capital formation :
When the existing 'human resource' is further developed by becoming more educated and healthy, we call it 'human capital formation' that adds to the productive power of the country just like 'physical capital formation'.
'Investment in human capital (through education training, medical care) yields a return just like investment in physical capital.
(i) It increases the productivity of the workers.
(ii) Educated, trained and healthy people can use natural resources in a better way.
(iii) It adds to quality of labour.
(iv) A country can earn foreign exchange by exporting services.
(b) Human resource is different from other resources like land and physical capital :
Land consists of all natural resources. These are provided to us by nature. Physical capital consists of all those objects that help in further production of different type of goods and services. Human resource, on the other hand, consists of knowledge and skills. Other resources are not capable of bringing about an improvement in them by their own effort; they can be changed only by the human resources. They do not have a mind and brain of their own. Human resource, on the other hand, can be trained to perform any task for which it is required. It requires education, training and health care. These, in turn, are again provided by human resources. Thus, Human resource, unlike other factor resources, has an ability to improve itself.
(c) "Population is an asset for the economy rather than a liability" :
Population, for long, had been seen as a liability which slows down the rate of economic growth. This view of population was based on the fact that population represented the stock of human being. Human beings make a demand on nation's resources for their survival. Larger the population more the resources like, food, health facilities, etc., would be required by it for its survival. Hence, population would treated as a liability. However, this view of population is not the correct one. More important thing is that population is the source of supply of the most important factor resource, i.e., human capital. It is human capital that organizes the production activity and makes other factor resources work. It is in this sense that the stock of knowledge and skills that constitutes human resource is a valuable asset. However it may be noted that unless human beings are converted into human resource they may constitute a liability.
(d) Importance of Human Capital Formation :
Investment in human resource (via education and medical care) can give high rates of return in the future. This investment on people is the same as investment in land and capital.
(e) Virtuous cycle of human development :
Educated parents are found to invest more heavily on the education of their child. This is because they have realized the importance of education for themselves. They are also conscious of proper nutrition and hygiene. They accordingly look after their children's needs for education at school and good health. A virtuous cycle is thus created in this case. A vicious cycle may be created by disadvantaged parents who, themselves uneducated and lacking in hygiene, keep their children in a similarly disadvantaged state.
'Countries like Japan did not have any natural resources; still they are developed countries'.
They have invested on people especially in the field of education and health.
The skilled and trained people have made efficient use of other resources like land and capital. Efficiency and technology evolved by people have made these countries rich/developed.