SDG 3: Good Health and Well-being | SDG 4: Quality Education | SDG 8: Decent Work and Economic Growth
Ministry of Education | Ministry of Health and Family Welfare | Ministry of Skill Development and Entrepreneurship
The World Bank report, Building Human Capital Where It Matters notes that human capital accumulation is driven by three critical settings—the home, the neighborhood, and the workplace—which must be addressed collectively to reverse recent global declines.
Between 2010 and 2025, even as incomes rose and poverty declined, two-thirds of low- and middle-income countries experienced a downturn in nutrition, learning, or workforce skills. The report suggests that the current deficits in health, education, and skill development at work can cost low- and middle-income countries 51% of their future labor earnings,
The report introduces the Human Capital Index Plus (HCI+), a newly expanded metric that tracks human capital from birth to age 65 and quantifies how gaps in labor market participation translate into forgone lifetime earnings. Findings indicate that skill gaps emerge before age five in the home, neighborhoods significantly influence future earnings regardless of parental income, and a lack of on-the-job learning in the workplace limits adult productivity. The report calls for integrated, people-centered strategies that align financing and institutions across these three real-world settings.
Key Pillars of the Settings-Based Human Capital Approach
The Home (Foundational Setting): Addressing skill gaps that emerge before age five through parenting and preschool programs that promote safe, non-violent care environments.
The Neighborhood (Opportunity Setting): Mitigating the impact of local environments—such as pollution and crime—which can double the earning potential of children from similar income backgrounds.
The Workplace (Productivity Setting): Reforming labor markets to expand apprenticeships and on-the-job learning for the 70% of workers currently in low-quality self-employment or small-scale agriculture.
The HCI+ Data Agenda: Implementing an ambitious data agenda to track human capital accumulation throughout the lifecycle and identify gender gaps in labor participation.
Cross-Sectoral Policy Integration: Fostering collaboration between health, education, and labor departments to create coherent support systems for households.
Human Capital Stagnation and Latent Health in India
Worrisome Skill Acquisition: On average, an individual in India acquires only about half as much human capital through work as an individual in Brazil.
Stagnating Health Markers: India is identified as one of the low- and lower-middle-income countries where adult height—a proxy for latent health status—has shown little progress, with the 1996 birth cohort remaining significantly shorter than global high-income benchmarks.
Rising Inequality: Unlike Latin America, where wage inequality declined in the 2000s, India experienced increasing wage inequality alongside a rise in the returns to education and specialized skills.
The Home: Early Gaps and Gendered Care
Early Skill Deficits: India exhibits patterns similar to Ethiopia and Viet Nam, where vocabulary and math skill gaps linked to family circumstances (maternal education) emerge before age five and remain virtually constant through adolescence.
Gender Bias in Care: In rural India, male infants receive significantly more care than female infants, with parents devoting 60 fewer minutes a day to care if their youngest child is a girl.
Son Preference and Health: The prevalence of stunting is notably less widespread among eldest sons than among daughters or younger sons, reflecting cultural norms where eldest sons are prioritized as future caregivers.
Preschool Success: India has successfully demonstrated that secondary-school graduates with only two weeks of training can effectively accelerate child skill development in preschool settings.
The Neighborhood: Environment and Role Models
Sanitation Externalities: Evidence from rural India shows that the health benefits of improved sanitation (reduction in diarrhea) are modest for individual households unless village-wide coverage reaches at least 30%, with much greater benefits at full coverage.
Coal Plant Impacts: Children living near coal plants in India are 0.1 standard deviations shorter than unexposed children, with the negative effect increasing the closer they live to the plant.
Female Leadership: Exposure to women’s leadership on village councils has been shown to positively influence the career aspirations and educational attainment of adolescent girls.
Service Quality Variance: A study of 817 rural villages found that doctors in the lowest-quality health facilities were 46 percentage points less likely to correctly diagnose tuberculosis compared to those in the top 10% of villages.
The Workplace: Productivity and Participation
Low Returns to Experience: In India, the annualized returns to experience for wage workers are 6.5%, but this drops to 3.8% for the self-employed, who often work in isolation on low-skilled tasks.
Soft Skills Multiplier: An on-the-job training program for garment workers in India raised the productivity of trained workers by 13% and—through knowledge spillovers—improved the productivity of untrained coworkers by 12%.
Women’s Economic Potential: Removing institutional and cultural barriers to women’s entrepreneurship in India could double female labor force participation and increase real GDP by 43%.
Addressing Harassment: Urban India’s SHE Teams (specialized police patrols) have proven effective in reducing street harassment, thereby potentially improving women’s safe access to the workplace
What is Human Capital? Human capital refers to the health, knowledge, skills, and experience that individuals accumulate over their lifetimes, which enhance their productivity and ability to contribute to society. It encompasses all characteristics that make a person more capable of performing work and generating economic value. Investments in human capital are essential for achieving economic growth, reducing poverty, and improving overall societal well-being.
What is the “Human Capital Index Plus (HCI+)”? The Human Capital Index Plus (HCI+) is an expanded global metric launched by the World Bank to track human capital accumulation across the entire lifecycle, from birth to age 65. Unlike the original HCI, which focused primarily on health and education outcomes for children, the HCI+ includes metrics for adult productivity and labor market participation. It specifically calculates how gaps in job quality and employment—particularly for women and youth—translate into forgone future labor earnings, providing policymakers with a clear financial rationale for investing in lifelong learning and workforce protection.
Policy Relevance
The World Bank’s settings-based approach represents a transition from siloed education/health programs to “Integrated Lifecycle Governance”, aligning with India’s goals for a high-productivity workforce by 2047.
Strategic Impact:
Bridging Early Childhood Gaps: India can utilize the report’s emphasis on the Home setting to strengthen the “National Early Childhood Care and Education” (ECCE) framework, ensuring care environments improve before children reach formal schooling.
Targeted Urban/Rural Interventions: The Neighborhood findings support a more granular approach to the “Smart Cities” and “Rurban” missions, focusing on how local infrastructure and safety directly drive long-term earning potential.
Formalizing On-the-Job Learning: For India’s large informal workforce, the Workplace recommendations suggest a shift toward large-scale apprenticeship and childcare support to boost female labor force participation.
Leveraging HCI+ for Benchmarking: Adopting the HCI+ framework allows the Ministry of Skill Development to quantify the economic cost of the 20% of youth who are neither studying nor working (NEET), driving more urgent policy action.
Follow the full report here: World Bank: Building Human Capital Where It Matters