Higher Education is a complex reality embedded in the diverse and layered social structure constituted by the interplay among the economy, society, culture, polity and geography at a particular historical juncture. This Working Paper seeks to understand the salience of human capital in the functioning of a Higher Education Institution and the economic rationale behind higher education policy making. The theoretical perspective adopted is located within the sub-discipline of Economics, referred to as Economics of Education. This paper consists of three parts. In Part A, the paper seeks to analyse critically the concept of human capital and human capital theory and traces out the implications for the higher education sector. In part B, the paper seeks to examine critically the economic rationale that informs higher education reform by focusing on two concepts of efficiency, technical at the institutional and allocational or exchange at the system level. We argue that the concept of human capital remains useful to explain why public and private funded institutions have failed to deliver quality education in the context of India. In Part C, we make an attempt to unravel the rationale behind Indian higher education reform as mooted in the National Education Policy 2020 (NEP). This paper argues why the ongoing higher education reform in India based on the NEP may not yield the desired results as the ground reality that exists in Indian higher education defies the underlying assumptions of the policy makers. This Paper argues that while Economic principles can explain some interesting aspects of the reality we encounter in the higher education sector, one has to be, however, careful while applying the Economic principles in reforming the sector more so in the context of a developing country like India. Though the human capital theory stands much discredited today because of the weakening link between the two domains, education and employment, the concept of human capital, however, remains useful for the policymakers to focus on to create a sound foundation for a meaningful higher education reform.
