Some of the most important composition of human investment and its significance in economic development are as follows:

A. Health and Nutrition B. Education and Training C. Housing Development.

A. Health and Nutrition:

A healthy manpower is a great aspect for a developing economy as it leads to greater output per man. But the health and under nourishment adversely affect the quality of manpower. But in Under Developed Countries (UDC) people are underfed and undernourished which results in poor quality of manpower. There is also deficiency of proteins and vitamins in the diet of the people and due to the lack of medical facilities diseases are very common in the people.

The best way to improve the quality of manpower in UDC is to provide adequate food and better nourishment to people, better sanitary facilities and the extension of medical, facilities which in turn will rise the efficiency and the productivity of the people.


Human capital, is therefore, “needed to staff new and expanding government services to introduce new system of land use and new methods of agriculture, to develop new means of communication, to carry forward industrialization, and to build the educational system. In other words innovation or the process of change from static or traditional society, requires very large doses of strategic human capital.”

B. Education and Training:

The investments made in education accelerated the economic growth. Edward F. Donason estimated that investment in education contributed 23% of the growth of total real income and 42% of the growth of real national income per person employed in U.S.A.

The effective utility of manpower depends on education, training and industrial experience of the people. Prof. Singer observes that, “Investment in education is not only highly productive but also yields increasing returns in so far as cooperating terms of skilled and educated people are worth more than the sums of the individuals of which they are composed. Whenever we look in this area of human investment we find increasing returns at play.” The investment made in education enhances the productivity of the work force. The greater progress will occur in those countries where education is wide spread and where it encourages experimental outlook.

In addition to this it has been observed that LDC import physical capital for its development but due to the lack of critical skills they fail to utilize it properly. Thus the technological change is the basic determinant of economic growth. Prof. Solow estimated that technical change accounted for about 2/3rd of the growth of the U.S.A. economy, after allowing for growth in the labour force and capital stock.


Thus educational development is a pre-condition of technological change. But education has brought will change in UDC which is largely responsible for economic backwardness. Due to inadequate investment in educational development majority of people in UDC are illiterate while the population in developed countries is literate.

To overcome this the UDC must use modern techniques as used in advance countries. In fact, without an improvement in the quality of human factor no progress is possible in UDC. Schultz observed that, “It is as if we had a map of resources which did not include a mighty river and its tributaries. The particular river is fed by schooling, learning on-the-job, advances in health and the growing stock of information of the economy.”

Investment in human capital is also required to raise the general living standards of the people in UDC and which can be done through education and training which make fuller and rational utilization of surplus manpower by providing larger and better job opportunities in both rural and urban areas which in turn raise incomes and living standards of the people.

The expansion of education in UDC must take place at primary, secondary and higher levels. The expansion in secondary education can contribute much to the economic development in UDC. Higher education is also important as it results in creating highly trained and technical manpower, scientists and research oriented persons. It accelerates the process of economic development. This type of education must be development oriented. The persons should be sent abroad to achieve higher education which does not exit in the country.


Adult education and training is another integral part of human resource development programme. There should be provision of in service training. Special incentives should be given for the development of scarce skills. Various Professional training courses should be widely arranged.

C. Housing Development:

The last component of human investment is the development of housing facilities for the people as housing development is an important determinant of human resource development as the comfortable living makes a man better agent of production. But in UDC it must be given more priority that workers must be provided with healthy living conditions. Special incentive for private house construction must be provided. Subsidized housing schemes play an important role in these countries.