The role of investment in human capital contributing to the economic growth are :
(i) Increase in the productivity of physical capital : Skilled workers are better able to utilise the machines, production plants, tools and equipments. They handle the productive assets in such a manner that these not only enhance their productivity but also lead to an efficient utilisation of the physical capital. When the productivity increases, the pace of growth is automatically accelerated.
(ii) Innovation of skills: An educated person is more productive and skillful. He has the potential to develop new skills and create new and innovative techniques that can be more efficient and productive. Also the adaptability to the new techniques and innovation is higher for an educated person. Greater the number of skilled and trained personnel, greater will be the probabilities of innovations.
(iii) High participation rate and equality: Human capital endowed with higher technical skills and better health is more productive and efficient. This increases the participation of more people in the process of economic growth and development. Higher the participation rate higher is the degree of social and economic equality in the country.
(iv) Increase in output levels: The formation of human capital in a country leads to increase in skills and capacity of the individuals. With increased capacity and skills people are able to contribute more towards the process of production. Higher contribution of people with greater skills and knowledge results in increased in output levels in the economy.