Question

How do you think?

Foreign investors will be reluctant to invest in poor countries if their poverty is due to their poor human capital. Because a country lacks skilled workers, it will be difficult to use more advanced technology and machines. So the rate of return on the machine is very low and that explains why capital flows more to rich countries than to poor ones. Well-educated poor countries are more likely to have human resources flowing to rich ones. "Well-educated Indians transfer 14.4 times as much to the US as uneducated Indians," “the skilled would want to move to poor countries, because the skilled wage differential is actually in favor of the rich countries. An engineer in Bombay earns $2,300 per year; an engineer in New York earns $55,000 a year ”

Answer 1

That is all true. Actually Human capital formation (building more skills in its people) has remained a challege for developing countries like India. Following points take you futher into the matter:

Determinants or Sources of Human Formation in a country:

1. Total expenditure on education
2. Study programs for adults
3. Policies about check the school dropout rates
4. Focus upon on-the-job training
5. Formation of technical educational institutions in the country
6. Expenditure on healthcare and related services
7. Expenditure on information

In light of the above, we certainly get an idea as what kind of difficulties are faced by the developing countries like India. However, slowly and steadily, things seem to be improving a little. With the pace of development rising in countries like India, to an extent these have been able to check the migration of skilled labour to foreign lands. Also, thanks to the present restrictive immigration policies by US and other countries, this problem is waning out.

Still, we have to accept, India and alike countries have enough left to do in the direction of improving on human capital index and provide enough good opportunities to the skilled labour in-land only.

Role of human capital in economic growth:

1. Higher productivity of physical growth
2. Facilitation of innovative skills
3. Boost to research and development
4. Transformation in emotional and material environment of growth
5. Higher rate of participation and equality

Challenges faced by developing countries like India:

1. Rising population
2. Brain drain (that you talked about in very nice way)
3. Deficient manpower planning
4. Low academic standards
5. Insufficient on-the-job training
6. Government's failure to sensitize people about success after education
7. Proper vocationalization of higher education
8. Gender bias (India still aspires for women-empowerment)
9. Low access of educaitonal services in rural areas
10. Uncontrolled privatization of school education
11. Low government expenditure in education sector