✓ Board-verified
Economics · 2026 · 4 marks
CBSE 2026 · Region 5 · Set 3 · Q31
(a)Define ‘Human Capital Formation’.(ii)Explain ‘Expenditure on Information’ as a source of human capital formation.Shruti works in a public sector bank as a clerk. She gets a fixed monthly salary, provident fund, retirement benefits and health insurance. Her brother, Ramesh, drives an auto-rickshaw. His daily earnings depend on the number of passengers. He does not receive benefits like paid leave, pension etc.Classify the types of sectors Shruti and Ramesh are working in and highlight the distinction between the two sectors.
(a)
Define ‘Human Capital Formation’.
(ii)
Explain ‘Expenditure on Information’ as a source of human capital formation.
Shruti works in a public sector bank as a clerk. She gets a fixed monthly salary, provident fund, retirement benefits and health insurance. Her brother, Ramesh, drives an auto-rickshaw. His daily earnings depend on the number of passengers. He does not receive benefits like paid leave, pension etc.
Classify the types of sectors Shruti and Ramesh are working in and highlight the distinction between the two sectors.
Marking-scheme solution
(a)
Human Capital Formation refers to the addition to the stock of human capital over a given period of time.
(ii)
People spend to acquire information relating to the labour market and other markets like education and health. This information is necessary to make decisions regarding investments in human capital as well as for efficient utilisation of the acquired human capital stock. Thus, ‘Expenditure on Information’ is a source of human capital formation.
Shruti is working in the formal sector.
On the other hand; Ramesh is working in the informal sector.
Formal sector includes all the public sector establishments and those private sector establishments which employ $\displaystyle 10$ hired workers or more. Formal sector workers are entitled to fair wages and other social security measures such as pension, provident fund, etc. Additionally, they get paid holidays and medical allowances.
Whereas;
Informal sector includes those private sector establishments which employ less than $\displaystyle 10$ hired workers. Workers in the informal sector do not get regular income and social security benefits. They can be dismissed without any compensation. Additionally, they may not get paid holidays and medical allowances.
More from Human Capital Formation in India
CBSE Class 12 Economics past-paper question from the 2026board exam, with the answer as CBSE’s own marking scheme gives it. Where our answers come from.