Economic growth means the increase in real national income. An educated person contributes more to growth than an illiterate person as their labour skill generates more income. A healthy person provides uninterrupted labour supply for a longer period, making health crucial for growth.

The causality between human capital and economic growth flows in either direction. Higher income causes the building of high-level human capital, and vice versa; high-level human capital causes the growth of income.

Empirical evidence proving that increased human capital causes economic growth is rather nebulous due to measurement problems. Indicators like years of schooling or life expectancy may not reflect the true quality of education or health status.

Analysis shows convergence in measures of human capital but no convergence of per capita real income. In developing countries, human capital growth has been faster, but per capita real income growth has not been as fast.

India recognized this relationship long ago. The Seventh Five Year Plan noted that a large population, when trained and educated, can become an asset in accelerating economic growth. Thus, investment in human capital formation is considered efficient and growth enhancing.