Human Development Index: Components and Calculation

The Human Development Index (HDI) is a composite measure used to assess average achievements in a country’s human development. It looks beyond income alone and combines health, education and living standards to give a broader picture of well-being.

Developed by the United Nations Development Programme (UNDP), HDI is widely used for cross-country comparison and policy analysis. It highlights whether economic growth is translating into better human outcomes.

Conceptual Origin and Purpose

• Founders: The HDI was conceived by Pakistani economist Mahbub ul Haq and Indian Nobel laureate Amartya Sen.
• Launch: It was introduced by the UNDP in 1990.
• Purpose: It was designed as an alternative to using Gross Domestic Product (GDP) alone as a measure of progress.
• Core idea: The index shifts attention from purely economic output to human capabilities, opportunities and well-being.

Dimensions and Indicators

HDI evaluates development across three dimensions: a long and healthy life, access to knowledge and a decent standard of living. These are measured using four indicators.

• Life expectancy at birth: Measures the health dimension by estimating the number of years a newborn is expected to live under current mortality patterns.
• Mean years of schooling: Measures the average number of years of education received by people aged 25 years and older.
• Expected years of schooling: Measures the number of years of schooling a child of school-entry age can expect to receive.
• Gross National Income (GNI) per capita: Measures the standard of living and is adjusted for Purchasing Power Parity (PPP).

Calculation and Normalization

Each indicator is first converted into a value between 0 and 1 using fixed goalposts. This makes it possible to compare variables measured in different units.

• Standard normalization: Used for health and education indicators. The formula is: Dimension Index = (Actual Value – Minimum Value) / (Maximum Value – Minimum Value).
• Logarithmic normalization: Used for GNI per capita to reflect diminishing marginal utility of income. The formula is: Income Index = [ln(Actual GNI per capita) – ln(100)] / [ln(75,000) – ln(100)].
• Education index: Calculated as the arithmetic mean of the normalized mean years of schooling index and expected years of schooling index.

Aggregation and Classification

• Geometric mean: Since 2010, the final HDI has been calculated as the geometric mean of the health, education and income indices.
• Why geometric mean matters: It reduces the effect of high performance in one dimension offsetting very poor performance in another.
• Formula: HDI = ∛(Health Index × Education Index × Income Index).
• Very High human development: 0.800 and above.
• High human development: 0.700 to 0.799.
• Medium human development: 0.550 to 0.699.
• Low human development: Below 0.550.

Supplementary Development Indices

• Inequality-adjusted HDI (IHDI): Adjusts human development for inequality in health, education and income distribution.
• Gender Development Index (GDI): Compares HDI achievements of women and men.
• Gender Inequality Index (GII): Captures gender gaps in reproductive health, empowerment and labour market participation.
• Multidimensional Poverty Index (MPI): Identifies overlapping deprivations in health, education and living standards at the household level.
• Planetary pressures-adjusted HDI (PHDI): Adjusts HDI for environmental pressures such as carbon dioxide emissions and material footprint.

Key Prelims Takeaways

• Origin: Conceived by Mahbub ul Haq and Amartya Sen; launched by the UNDP in 1990.
• Purpose: Provides a broader development measure than GDP by combining health, education and income.
• Indicators: Uses life expectancy at birth, mean years of schooling, expected years of schooling and GNI per capita.
• Income adjustment: GNI per capita is measured in PPP USD and normalised using logarithmic scaling.
• Aggregation method: Since 2010, HDI has used the geometric mean instead of the arithmetic mean.
• Goalposts: Fixed minimum and maximum values are used for standardisation, including 20–85 years for life expectancy and USD 100–75,000 for GNI per capita.
• Complementary indices: UNDP also publishes IHDI, GDI, GII, MPI and PHDI.