Human Development Index
Although economies were able to articulate differences between growth and development, it took some more time when the right method of measuring development could be developed. It was the established fact that the goal of the progress goes beyond the mere ‘increase in income.’ International bodies such as UNO (United Nations Organisation), IMF (International Monetary Fund) and WB (World Bank) were concerned about the development of the comparatively underdeveloped regions of the world.
The dilemma of measuring the developmental levels of economies was solved once the United Nations Development Programme (UNDP) published its first report in 1990. The report had a human development index which was the first attempt to define and measure the level of development of economies. It was the product of select team of leading scholars, development practitioners and members of Human Development Report Office of the UNDP. The first such team was developed by Mahbub Ul Haq and Inge Kaul.
The HDR (Human Development Report) measures development by combining three indicators- Health, Education and Standard of Living- converted into composite Human Development Index, the HDI. It sets a minimum and a maximum post for each dimensions called goalposts, and then shows where each country stands in relation to these goalposts, expressed as value between 0 and 1.
The Education component of the HDI is now measured by two other indicators-
- Mean of years of schooling (for adults aged 25 years): this is estimated based on educational attainment data from census and surveys available in the UNESCO Institute for Statistics database and Baroo and Lee methodology.
- Expected years of schooling (for children of school entering age) : these estimates are based on enrolment by age at all levels of education. Expected years of schooling is capped at 18 years,
These indicators are normalized using a minimum value of zero and maximum values are set to the actual observed maximum value of mean years of schooling, from the countries in the time series. The education index is the geometric mean of two indices.
The Health component is measured by the life expectancy at birth component of the HDI and is expected using a minimum value of 20 years and maximum value of 83.57 years.
The Standard of Living component is measured by GNI (Gross National Income/Product) per capita at ‘Purchasing Power Parity in US Dollars’ instead of GDP per capita of past.
The scores of three HDI dimension indices are then aggregated into a composite index using geometric mean. The HDI facilitates instructive comparisons of the experiences within and between different countries.
The UNDP ranked the economies in accordance of their achievements on the above-given three parameters on the scale of one. As per their achievement the countries were broadly classified into three categories with a range of points on the index:
- High Human Development Countries: 0.800-1.000 points on the index.
- Medium Human Development Countries: 0.500-0.799 points on the index.
- Low Human Development Countries- 0.000-0.499 points on the index.
By 1995, economies around the world had officially accepted the concept of human development propounded by the UNDP. The HDI could be considered as one possible way of measuring development which was evolved by the concerned group of experts with the maximum degree of consensus. But the index which calculates the development of the economies on certain parameters might be overlooking many other important factors, which affect the development of the economy and standard of living.
Such other determinants affecting our live conditions might be –
- Cultural aspects of the economy.
- Outlook towards aesthetics and purity of the environment.
- Aspects related to the rule and administration in the economy;
- People’s idea of happiness and prestige;
- Ethical dimensions of human life.
Ramesh Singh, “Indian Economy” (Mc Graw Hill Education (India) Private Limited, 13th edn.) 2.4
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