In August 1945, the United States dropped atomic bombs on the Japanese cities of Hiroshima and Nagasaki. This took Japan many years back in terms of development. Everyone thought it would take decades for the country to reach back to its initial state. After the atomic bombing, it was rumored that nothing will grow in these cities for 75 years. Surprisingly, Japan built its economy in no time. The reason? It’s investment in the human resources, especially in the field of education and health. It is one of the countries having very little amount of natural resources but still comes in the list of developed nations. Due to investment in human resources, this country’s people have made efficient use of limited resources like land and capital. This reason, among many, made countries like US and Canada to expend on developing their human capital. India also recognized the importance of human capital in economic growth in one of its five year plans. Investment in human resources becomes all the more important for India, it being a highly populated country. It is pertinent to note that it is important to invest in country’s human resources even if such investments do not result in higher labour productivity. This is where concept of human development steps in. It is based on the idea that it is only when people have the ability to read and write and the ability to lead a long and healthy life that they will be able to make other choices which they value.

What are the sources of human capital? (mentioned in the above case study and also apart from it)
i. Investment in education
ii. Investments in health
iii. On- the job training
iv. Migration
v. Information

i, ii, iii, iv, v

Investment in education is considered as one of the main sources of human capital. There are several other sources as well. Investments in health, on- the job training, migration and information are the other sources of human capital formation. Expenditure incurred for acquiring information relating to the labour market and other markets is also a source of human capital formation.