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Human Development Index (HDI)

Human Development Index (HDI)

  • HDI is the most popular index calculated by the HDR. It measures human development of a particular country or region in terms of three dimensions — Longevity, Knowledge and Standard of Living.
  • Longevity is measured by Life-Expectancy at birth.
  • Knowledge, before HDR, 2010, was measured on the basis of two variables — Adult Literacy Rates (ALR) and Gross Enrolment Ratio (GER) of primary, secondary and tertiary age population.
  • Gross Enrolment Ratio (GER) is defined as the ratio of the number of individuals enrolled in a given level of schooling (Primary, secondary or tertiary) to the total number of children in the age group that typically attends that level.
  • Since HDR, 2010 two new variables have been incorporated to measure knowledge dimension:
  • Average or Mean years of schooling in the Adult population replacing

Expected Years of Schooling for school-age children replacing GER

  • Expected years of schooling is defined as the years of schooling that a child can expect to receive given the current age-specific enrolment rates.    Human Development Index (HDI)
  • The third dimension of HDI — Standard of Living is now measured by Gross National Income (GNI) per capita at Purchasing Power Parity (PPP) replacing GDP per capita at PPP being used earlier.
  • Thus, this dimension now also includes income from remittances and international development assistance.
  • The reason for using the concept of PPP is that HDI attempts to make an assessment of 187 diverse countries and areas, with very different price levels.
  • To compare economic statistics across countries, the data must first be converted into a common currency. Unlike market exchange rates, PPP rates of exchange allow this conversion to take account of price differences between countries.
  • In that way GNI per capita (PPP US$) better reflects people’s living standards. In theory, 1 PPP dollar (or international dollar) has the same purchasing power in the domestic economy of a country as US$1 has in the US economy.
  • The new PPP values have been used since 2008. The latest International Comparison Survey ICP, from which the PPPs are calculated, was done in 2005; 146 countries took part in the survey, which were 26 more than in the previous one.
  • For computation of the 2011 HDI, GNI is expressed in constant 2005 PPP$. This is a change from 2010 when GNI was expressed in constant 2008 PPP$. A reason was to fully comply with the World Bank’s and IMF’s standards for expressing the monetary variables in 2005 constant international (PPP) dollars. This change had a differential impact on countries but on average the change was minimal.
  • The indicators were changed for several reasons. For example, adult literacy used in the old HDI (which is simply a binary variable, literate or illiterate, with no gradations) is an insufficient measure for knowledge achievement. By including average years of schooling and expected years of schooling, one can better capture the level of education and recent changes.
  • Gross Domestic Product (GDP) is the monetary value of goods and services produced in a country irrespective of how much is retained in the country. Gross National Income (GNI) expresses the income accrued to residents of a country, including some international flows, and excluding income generated in the country but repatriated abroad.
  • Thus, GNI is a more accurate measure of a country’s economic welfare. As shown in the 2010 Report, significant differences could exist between the income of a country’s residents, measured by GNI or GDP.
  • Most of the changes that were made in 2010 have been continued in HDR, 2011 and 2013.

Very High Human Development Countries are those comprising of top 25% (or HDI quartile) performers in terms of human development.      Human Development Index (HDI)

There are 49 countries in this category. Norway, Australia, and Switzerland are the top three countries in terms of HDI, 2014

High Human Development Countries are those with HDI value in 51st to 75th This category consists of 53 countries.

Medium Human Development Countries are those with HDI value in 26th to 50th There are 42 countries in this category.

Low Human Development Countries with HDI value in the bottom -most, quartile or worst 25% performers in terms of HDI. The remaining countries fall in this category.

Since HDR-2013, a concept of ‘tie” has been introduced, i.e. if two countries have the same HDI index upto 3 decimal points, they are given same rank.

For example, in HDR 2014 report, Austria, Belgium, and Luxembourg each has HC value of 0.881, therefore, given same rank 21. Then, none will get 22, 23 and the next Rank will be 24. Last rank is Niger at 187.

India has shown an improvement of one rank, ranked at 135 out of 187, while was ranked 136 out of 186 in HDR 2013.  Human Development Index (HDI)



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