ECONOMICS HDI
Only ten years passed since the PQLI was developed, another index came into being. Since 1990,
an agency of the United Nations, viz. The United Nations Development Programme (UNDP) has
been publishing every year a report called Human Development Report. This report, besides
discussing various aspects of human development, has been ranking various countries
according to the level of human development index. Before the human development index is
described, it would be an interesting idea to look at the GDP/GNP from a fresh angle. It is
pointed out that these measures are measures of activity and they concentrate on production of
commodities--goods and services. We should, it is suggested, instead focus on capabilities and
measure improvement in capabilities of people. Living long and healthy life is a capability and
so is to be able to read and write. With rising capabilities, we have wider choices and
development is what if not widening of choices! The idea has an added dimension that these
capabilities cannot be accumulated. In a way it is close to PQLI except that now the theoretical
scaffolding is strong. But at the same time, a non-physical entity will enter in the making of
index and it will create problem for international comparison.
The Index
Human Development Index is broadly an average of social aggregates/averages of longevity,
knowledge and access to resources. To put it more concretely, it is an equi-weighted average of:
1. Life Expectancy Index (LEI)
2. Education Attainment Index (EAI)
3. Standard of Living Index (SLI)
where the sub-indices were to be calculated by the same old method of the PQLI. In other
words.
HDI = (⅓) (LEI + EAI + SLI)
Components
Life expectancy here refers to life expectancy at birth, not at age one, because infant mortality is
not entering this index as a separate indicator. Educational attainment is literacy plus. To begin
with, it was only adult literacy. Later on, it became a combination of adult literacy rate and
mean years of schooling. In highly developed countries, adult literacy was complete but
education level was still rising. This could be reflected through mean years of schooling or
enrolment ratio. Now, mean years of schooling have been replaced by combined enrolment
ratio. The weight assigned to adult literacy rate (ALR) is ⅔ while that for combined enrolment
ratio (CER) is ⅓ Therefore, educational attainment index may be given as:
EAI = (⅔) ALR + (⅓) CER
Standard of living is represented here by a transformation of per capita income. Besides
longevity and knowledge, it has been argued, there are many things which people desire. It is
difficult to capture them. For living a decent life, people need resources. Per capita national
income is the simplest measure of resources at the command of people. Since this exercise has
basically been conducted for international comparison, per capita incomes of different nations
have per force to be brought to some common denominator. Per capita incomes are first
converted into purchasing power parity dollars (PPP$).
The second step concerns with the fact that the returns to a dollar of income is not the same
throughout the whole range of income. The increase in returns should diminish as income
increases and should eventually become zero. This idea was handled by the UNDP in a variety of
ways. Presently, standard of living is being captured by the log-transform of per capita income
(PCI) in PPP$. In other words.
Standard of living = log (PCI in PPP$)
At base 10, logarithms of 10, 100, 1000, and 10000 are 1, 2, 3, and 4 respectively. Thus, returns
to additions in income are diminishing as income goes on increasing. There could be many
other ways to accomplish this feature. The UNDP has tried other formulae in past but thought it
proper to change to simple logarithm conversion.
Normalisation
Since we are using only positive indicators in this index, we can write only one formula for
computing the component indices (CI):
CI = Actual Value-Minimum Value/Maximum Value-Minimum Value
where CI stands for LEI, ALRI, CERI and SLI. It may be noted that ALRI and CERI are just ALR
and CER respectively, each divided by 100.
Minimum and Maximum Values
After a lot of debate over years and following the norms for various components, the UNDP has
finally fixed the following minimum and maximum values for various components of Human
Development Index.
HDI and India
The United Nations Development Programme (UNDP) has been compiling human development
indices for different countries for which it had access to relevant data. These indices are
published in Human Development Report, brought out annually by the UNDP.
Notice that the data compilation takes time. We can also notice Between the last two years, we
find, India's rank improved by 13 while number of countries dropped by 12. It is quite possible
that most of the countries excluded were above India. We should also notice that India's rank
improved by 2 from 123 in 1988 to 121 in 1990 while the HDI value actually fell. It is possible
because of change in methodology and components used. Despite these weaknesses, we can see
that India's HDI value is improving since 1990 when it recorded its lowest value. Fortunately,
HDR 2001 has calculated HDI values for different countries on uniform basis with same
methodology by ensuring comparability across nations and over time, at an interval of five years
since We should notice that our HDI is improving since the mid-seventies. Perhaps we are
improving on all fronts, life expectancy (reflecting health to some extent), education (including
literacy) and general standard of living (represented by per capita income). The UNDP has been
categorising various countries as countries with high human development, with medium human
development and with low human development, depending upon whether a country had HDI
value above 0.8, between 0.5 and 0.8 or below 0.5. Prior to 2000, India was considered as low
human development nation. In 2000, it has become a country with medium human
development.
It will not be out of place to inform that some scholars have done interstate comparison for
India while some state governments have come out with state-level exercises for human
development index. These reports do contain more information on human development than
are available in compilation of HDI. Since March 2002, our Planning commission has also come
out with a report known as National Human Development Report.
Quality of Life Index
Some economists still feel that, though human development approach talks of many
dimensions, the human development index encompasses only very few of them, though
important ones. They feel that political and civic dimensions, if not environmental ones, need to
be incorporated in any such exercise.
In one such contribution ‘On Measuring the Quality of Life’ Dasgupta and Weale have
considered six parameters what they have called living standards'indicators or constituents of
well-being. These are:
per capita income in PPP$
life expectancy at birth in years
infant mortality rate in per thousand live births
adult literacy rate in per cent of adult population
index of political rights in seven-point scale
index of civil rights in seven-point scale.
Civil rights are rights of individuals vis-a-vis the State, while political rights are citizens'right to
play a part in governance of their country. Governance will mean who will govern and under
what laws. While the first four could be called ‘socio-economic’ indicators, the last two could be
said to be' political and civiL'indicators.
These indicators are aggregated in a peculiar way. First, countries are ranked according to each
of the indicators in ascending order from worst to best. Second, the ranks for different
indicators of country are added and thus for each country a rank-score is obtained. Third,
countries are again ranked according to their rank-scores.
Though, this work was done from late 1970s to early 1990s, using the data relating the results
are interesting. Of 48 countries listed, Mauritius comes the best and Sri Lanka, the second best.
China and India come 10th and 12th best from the top, while Bangladesh and Pakistan come
26th and 30th from the top. In both the pairs, scores in ‘socio-economic’ indicators are found to
diverge from those in ‘political and civil’ indicators. In ‘socio-economic’ indicators, China scores
better than India, Pakistan and Bangladesh but in ‘Political and Civil’ indicators, India scores
better than China, Bangladesh and Pakistan. Though the story is a bit old, it may hold even
today.
