Consider the following statements:
Human capital formation as a concept is better explained in terms of a process which enables
- 1.individuals of a country to accumulate more capital.
- 2.increasing the knowledge, skill levels and capacities of the people of the country.
- 3.accumulation of tangible wealth.
- 4.accumulation of intangible wealth.
Which of the statements given above is/are correct?
Answer & explanation
Answer: (c) 2 and 4
Human capital formation means building up the knowledge, skills and capacities of people, and what is built is intangible. So statements 2 and 4 describe it, while accumulating capital or tangible wealth describes physical capital.
- ✗ 1. Accumulating more capital, in the sense of money or assets, is physical capital formation. Human capital formation is about improving people themselves.
- ✓ 2. Human capital is the specialised skills, knowledge and abilities that people bring to work. Investment in education, health and training raises them.
- ✗ 3. Tangible wealth such as machines or buildings is physical capital, which can be sold in the market like a commodity.
- ✓ 4. Human capital is intangible: it is built into the body and mind of its owner and cannot be separated from that person.
Remember · Physical capital is tangible and separable from its owner. Human capital (skills, knowledge, health) is intangible and inseparable from its owner.
📘 Read it in NCERT: Class 11 Indian Economic Development, Ch 4 (practise this chapter) · Class 8 Exploring Society: India and Beyond (Part 1), Ch 7 (practise this chapter)
Sources
- NCERT Class 11 · Indian Economic Development, Chapter 4 “Physical capital is tangible and can be easily sold in the market like any other commodity. Human capital is intangible; it is endogenously built in the body and mind of its owner.”
- NCERT Class 8 · Exploring Society: India and Beyond (Part 1), Chapter 7 “human capital refers to the specialised skills, knowledge, abilities and expertise required to perform that labour.”
Question and answer: UPSC's official GS Paper I (2018, Series A) — paper ↗ · answer key ↗. Explanation: Minimalist IAS, checked 30 Sept 2026 (how we verify). ·