Human development and human capital look alike but human development is wider than human capital. Human Capital represents enhanced labour productivity and also stimulates innovations and creates ability to absorb new technology.

Human development is a much wider concept. It asserts that education and health are integral to human well being. That is why, this approach treats human being ends in themselves and human welfare should be increased through investments in education and health even if such investment does not result in higher labour productivity. Therefore, basic education and basic health are important in themselves, irrespective of their contribution to the labour productivity.