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Human Development Index

The Human Development Index (HDI) is a statistic composite index of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. It was introduced in 1990 by the UNDP in their Human Development Report to assess and compare development levels between nations beyond just economic measures. The HDI is calculated using a geometric mean of normalized indices for each of the three dimensions, with 1 indicating very high human development and 0 indicating low levels.

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92 views

Human Development Index

The Human Development Index (HDI) is a statistic composite index of life expectancy, education, and per capita income indicators, which are used to rank countries into four tiers of human development. It was introduced in 1990 by the UNDP in their Human Development Report to assess and compare development levels between nations beyond just economic measures. The HDI is calculated using a geometric mean of normalized indices for each of the three dimensions, with 1 indicating very high human development and 0 indicating low levels.

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Prithivi Raj
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Human Development Index

When countries’ per capita GDP ranking rise from one year to the next, governments
find satisfaction and they boast over the achievements.
But per capita GDP ranking hides a lot of things, a new indicator has been evolved to
understand the dynamics in achievements in the quality of. This index, popularly called
Human Development Index was first launched in the 1990 Human Development Report.
This index provides an assessment of a nation’s achievement and helps ranking of
different countries. The HDI is calculated to emphasise that people and their capabilities
should be the ultimate criteria for assessing the development of a country, not growth alone.
It is a single statistic that serves as a benchmark for both social and economic development.
Since 1990, a family of human development indices has been constructed over the years.
The most important among them introduced in 1995 ire ‘Gender-related Development Index
(GDI) and ‘Gender Empowerment Measure’ (GEM). In addition, ‘Gender Equality Index’
(GEI), ‘Human Poverty Index’ (HPI), etc., have been introduced. In 2010, the UNDP devised
a new index, called Multi-dimensional Poverty Index’ (MPI) that captures various
dimensions of human poverty.

The Human Development Index (HDI) is a measure of economic development and


economic welfare. The Human Development Index examines three important criteria of
economic development (life expectancy, education and income levels) and uses this to create
an overall score between 0 and 1.
 1 indicates a high level of economic development,
 0 a very low level.
The HDI combines:
1. Life Expectancy Index. Average life expectancy compared to a global expected life
expectancy.
2. Education Index
 mean years of schooling
 expected years of schooling
3. Income Index (GNI at PPP)
Components of the Human Development Index

Gross NI per capita:


Aggregate income of an economy is generated by its production and ownership of
factors of production, the incomes paid for the use of factors of production owned by the rest
of the world, converted to international dollars using PPP rates, divided by the mid-year
population.

The HDI methodology was revised in 2010. HDI is a composite index in 3 basic
dimensions— health, knowledge, and income. From 2010 HDI, health is still measured by
life expectancy at birth. However, the 2010 HDI measures achievement in knowledge by
combining the expected years of schooling for school-age children entering school today with
the mean years of prior schooling for adults aged 25 and older. Further, the income
measurement has been changed from PPP-adjusted per capita GDP to PPP-adjusted per capita
GNI that includes remittances.
These changes are of importance for many reasons. First, adult literacy rate used in
the old HDI (which is simply a binary variable—literate or illiterate, with no gradations) is
inadequate in measuring the attainment of knowledge. By including average years of
schooling and expected years of schooling one can better capture the level of education.
Secondly, GDP is the monetary measure of goods and services produced in a country,
irrespective of how much is retained in the country.
On the other hand, GNI measures the income accrued to residents of a country,
including some international flows, and excluding income generated in the country and
repatriated abroad. Thus, GNI is a more accurate measure of a country’s economic welfare.
Thirdly, prior to 2010, the HDI report used the arithmetic mean (AM) from 2010, it uses
geometric mean (GM) of dimension indices.
What the HDI shows?
The HDI give an overall index of economic development. It has some limitations and
excludes several factors that might have been included, but it does give a rough ability to
make comparisons on issues of economic welfare – much more than just using GDP statistics
show.
Limitations of Human Development Index
Wide divergence within countries. For example, countries like China and Kenya have
widely different HDI scores depending on the region in question. (e.g. north China poorer
than south-east)
HDI reflect long-term changes (e.g. life expectancy) and may not respond to recent
short-term changes.
Higher national wealth does not indicate welfare. GNI may not necessarily increase
economic welfare; it depends on how it is spent. For example, if a country spends more on
military spending – this is reflected in higher GNI, but welfare could actually be lower.
Also, higher GNI per capita may hide widespread inequality within a country. Some
countries with higher real GNI per capita have high levels of inequality (e.g. Russia, Saudi
Arabia)
However, HDI can highlight countries with similar GNI per capita but different levels
of economic development.
Economic welfare depends on several other factors, such as – threat of war, levels of
pollution, access to clean drinking water etc.
References
1. https://www.economicshelp.org/blog/glossary/human-development-index/

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