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Objectives of Project Study

1.​To understand the concept, components, and methodology
of the Human Development Index (HDI) as a measure of
national progress beyond just economic growth.​

2.​To explore how HDI is calculated using life expectancy,

education indicators, and GNI per capita.​

3.​To compare HDI rankings across countries and regions.​

4.​To analyze India’s performance on the HDI, including its

progress over time and key challenges such as inequality and
gender disparity.​

5.​To critically evaluate the limitations of HDI as a development

measure.​

6.​To relate the 2024 Nobel Prize in Economic Sciences to HDI,

by examining how inclusive or extractive institutions shape
long-term human development outcomes.​
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Introduction
Introduced by the UN in 1990, the Human Development Index (HDI) is a
measurement system to evaluate the level of individual human development
in each country. It is a summary measure of average achievement in key
dimensions of human development: a long and healthy life, being knowledgeable
and having a decent standard of living.

It is composed of four principal areas of interest: mean years of schooling,

expected years of schooling, life expectancy at birth, and gross national
income (GNI) per capita.

The HDI can be used to question national policy choices, asking how two
countries with the same level of GNI per capita can end up with different human
development outcomes. These contrasts can stimulate debate about government
policy priorities.
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How Is the HDI Measured?

The HDI is a summary measurement of basic achievement levels in human
development. The computed HDI of a country is an average of indices of each
of the life aspects that are examined: knowledge and understanding, a long
and healthy life, and an acceptable standard of living. Each of the components
is normalized to a scale between zero and one, and then the geometric mean
of the three components is calculated.2

●​ The health aspect of the HDI is measured by the life expectancy, as

calculated at the time of birth, in each country, and normalized so that
this component is equal to zero when life expectancy is 20 and equal to
one when life expectancy is 85.
●​ Education is measured on two levels: the mean years of schooling for
residents of a country, and the expected years of schooling that a child
has at the average age for starting school. These are each separately
normalized so that both 15 mean years of schooling and 18 years of
expected schooling equal one, and a simple mean of the two is
calculated.3
●​ The economic metric chosen to represent the standard of living is GNI
per capita based on purchasing power parity (PPP), a common metric
used to reflect average income. The standard of living is normalized so
that it is equal to one when the GNI per capita is $75,000 and equal to
zero when the GNI per capita is $100.

The final HDI score for each country is calculated as a geometric mean of the
three components by taking the cube root of the product of the normalized
component scores.

Calculation of HDI
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The HDI is calculated by geometrically averaging the normalized indices

for each of the three dimensions. The normalization is done to ensure
that each indicator falls between 0 and 1, allowing them to be averaged.
The formula for calculating the HDI value is:

HDI = ∛(IHealth) × (IEducation) × (IIncome)

Where:

●​ IHealth is the index for Life Expectancy,

●​ IEducation is the average of the indices for Mean Years of
Schooling and Expected Years of Schooling,
●​ IIncome is the index for GNI per capita.

1. IHealth: Index for Life Expectancy

The index for Life Expectancy (IHealth) is calculated using the formula:

IHealth = (LE – 20) / (85 – 20)

Where:

●​ LE is the Life Expectancy at birth.

●​ 20 years is considered the minimum life expectancy.
●​ 85 years is considered the maximum life expectancy.

This formula normalizes the life expectancy at birth within a scale of 0 to

1, where 20 years is the minimum expected value (set to 0) and 85 years
is the maximum (set to 1).

2. IEducation: Index for Education

The Education Index (IEducation) is the average of two indices: the Mean
Years of Schooling Index and the Expected Years of Schooling Index. It
is calculated as follows:

IEducation = (MYSI + EYSI) / 2

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Where:

●​ MYSI (Mean Years of Schooling Index) = MYS / 15

●​ MYS is the Mean Years of Schooling for the adult
population (ages 25 and older).
●​ 15 years is considered the maximum of mean years of
schooling.
●​ EYSI (Expected Years of Schooling Index) = EYS / 18
●​ EYS is the Expected Years of Schooling for children of
school-entering age.
●​ 18 years is considered the maximum expected years of
schooling.

This formula averages the normalized values of mean years of schooling

and expected years of schooling, each scaled from 0 to 1.

3. IIncome: Index for Gross National Income (GNI) per Capita

The index for GNI per capita (IIncome) is calculated using the formula:

IIncome = (ln(GNIpc) – ln(100)) / (ln(75,000) – ln(100))

Where:

●​ GNIpc is the Gross National Income per capita.

●​ The natural logarithm (ln) is used to account for the diminishing
importance of income with increasing GNI.
●​ 100 is considered the minimum GNI per capita (PPP $).
●​ 75,000 is considered the maximum GNI per capita (PPP $).

This formula normalizes the GNI per capita on a logarithmic scale

between 0 and 1, where $100 is the minimum and $75,000 is the
maximum.

Final HDI Calculation

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After calculating the indices for health, education, and income, the HDI is
computed by geometrically averaging these normalized indices:

HDI = √[IHealth × IEducation × IIncome]

This geometric mean ensures that a 1% improvement in any of the

dimensions has the same impact on the HDI, promoting a balanced
approach to development across all three dimensions.

Example Calculation
Given:

●​ Life Expectancy at Birth: 70 years

●​ Mean Years of Schooling: 10 years
●​ Expected Years of Schooling: 15 years
●​ GNI per Capita (PPP): $15,000

1. Life Expectancy Index: Using the same formula, (70 – 20) / (85 – 20)
= 0.769.

2. Education Index:

●​ MYSI: 10 / 15 = 0.667
●​ EYSI: 15 / 18 ≈ 0.833
●​ EI: (0.667 + 0.833) / 2 = 0.75

3. Income Index: Assuming the same formula,

(log(15,000) – log(100)) / (log(75,000) – log(100)) ≈ 0.757.

Recalculation of HDI
Now, with the corrected Education Index, let’s recalculate the HDI:

HDI = ∛(0.769 × 0.75 × 0.757)

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HDI ≈ ∛(0.436)

HDI ≈ 0.760

So, with the corrected calculation for the Education Index, the HDI in this
example would be approximately 0.760.

HDI Rankings
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HDI Rankings
Top HDI scores go heavily to Northern European countries, while the
lowest-scoring nations are largely found on the African continent.

The top 25 countries in the 2023/2024 HDI rankings are in the table below.4

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Top 25 HDI Rankings

Rank Country HDI Score

1 Switzerland 0.967

2 Norway 0.966

3 Iceland 0.959

4 Hong Kong 0.956

5 (Tied) Denmark 0.952

5 (Tied) Sweden 0.952

7 (Tied) Germany 0.950

7 (Tied) Ireland 0.950

9 Singapore 0.949

10 (Tied) Australia 0.946

10 (Tied) Netherlands 0.946

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12 (Tied) Belgium 0.942

12 (Tied) Finland 0.942

12 (Tied) Liechtenstein 0.942

15 United Kingdom 0.940

16 New Zealand 0.939

17 United Arab Emirates 0.937

18 Canada 0.935

19 South Korea 0.929

20 (Tied) Luxembourg 0.927

20 (Tied) United States 0.927

22 (Tied) Austria 0.926

22 (Tied) Slovenia 0.926

24 Japan 0.920

25 (Tied) Israel 0.915

25 (Tied) Malta 0.915

The bottom five countries are in the table below.4

Bottom 5 HDI Rankings

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Rank Country HDI Score

193 Somalia 0.380

192 South Sudan 0.381

191 Central African Republic 0.387

189 Niger 0.394

189 Chad 0.394

188 Mali 0.410

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GDP and HDI: A Comparison

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In general, global HDI maps track GDP maps relatively closely.

●​ Wealthy countries, not surprisingly, tend to have high HDI numbers, whereas poor
countries generally post low numbers. Exceptions to this general rule can be
instructive.
●​ Some oil-rich countries (Qatar, Equatorial Guinea) end up in significantly lower color
categories in regard to HDI than they do in regard to GDP, reflecting the unbalanced
nature of their development.
●​ A number of other countries, ranging from Kenya to Cambodia to Cuba to North
Korea, on the other hand, fall into higher categories on the HDI map, reflecting in part
successful educational programs.
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Exceptional areas also appear at the sub-national level.

●​ The region composed of Sri Lanka, the Maldives, and the Indian states of Tamil Nadu
and Kerala ranks much higher in terms of human development than it does in regard
to GDP.
●​ Sri Lanka and Kerala have long been noted for near universal literacy and impressive
levels of public health, achievements realized despite meager economic resources.
●​ More recently, Tamil Nadu has made rapid progress in these same areas. Whereas in
strictly economic terms, western India has the advantage, in terms of overall social
development, southern India comes out ahead.
●​ North-central India, in contrast, lags well back in both domains.
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Human Development Index of India:

Case Study
(blank)

(ruled)

■​ India’s HDI Ranking: India ranked 133rd in 2022 and improved

to 130th in 2023, with its HDI value rising from 0.676 to 0.685.
○​ The country remains in the "medium human
development" category, though it is approaching the
threshold for "high human development" (HDI ≥
0.700).
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■​ Regional Comparison: Among India’s neighbors, China (78th),

Sri Lanka (89th), and Bhutan (125th) rank above India, while
Bangladesh (130th) is on par. Nepal (145th), Myanmar (150th),
and Pakistan (168th) are ranked below India.
■​ Progress in Key Areas:
○​ Life Expectancy: India’s life expectancy rose from
58.6 years in 1990 to 72 years in 2023, the highest
ever, reflecting a strong post-pandemic recovery.
●​ This progress is attributed to national
health programs like National Health
Mission, Ayushman Bharat, Janani
Suraksha Yojana, and Poshan Abhiyaan.
○​ Education: India's mean years of schooling have
increased, with children now expected to stay in
school for 13 years, up from 8.2 years in 1990.
●​ Initiatives like the Right to Education Act
2009, National Education Policy 2020, and
Samagra Shiksha Abhiyan have improved
access, though quality and learning
outcomes still require attention.
○​ National Income: India’s Gross National Income per
capita rose over fourfold, from USD 2,167 in 1990 to
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USD 9,046 in 2023 based on 2021 Purchasing Power

Parity (PPP).
●​ Additionally, 135 million Indians escaped
multidimensional poverty between
2015-16 and 2019-21, contributing to HDI
improvement.
○​ AI Skills Growth: India is emerging as a global AI
leader with the highest self-reported AI skills
penetration.
●​ 20% of Indian AI researchers now remain in
the country, a significant rise from nearly
zero in 2019.

Overall,

-​ Between 1990 and 2022, India's HDI value changed from

0.434 to 0.644, an change of 48.4 percent.
-​ Between 1990 and 2022, India's life expectancy at birth changed
by 9.1 years, expected years of schooling changed by 4.6 years
and mean years of schooling changed by 3.8 years.
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-​ India's GNI per capita changed by about 287.0 percent between

1990 and 2022.

■​ Challenges Impacting India’s HDI:

○​ Inequality Reduces HDI: Inequality has reduced
India’s HDI by 30.7%, one of the highest losses in the
region.
○​ Gender Disparities: Female labour force
participation (at 41.7% and political representation
continue to lag.
●​ Steps like the 106th constitutional
amendment reserving one-third of
legislative seats for women show promise
for transformative change.
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The 2024 Nobel Prize and Its

Connection to HDI

The 2024 Nobel Prize in Economic Sciences was awarded to Daron

Acemoglu, Simon Johnson, and James A. Robinson for their research on
how institutions shape national prosperity. Their work helps explain why
some countries thrive while others struggle despite similar starting
points or resources.
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They argue that inclusive institutions—those based on the rule of law,

political participation, and equal opportunity—create the conditions for
long-term development. In contrast, extractive institutions, which
concentrate power and wealth in the hands of a few, prevent broader
progress.

This is directly relevant to the Human Development Index (HDI).

Countries with inclusive institutions tend to have higher HDI scores, as
they invest in public health, education, and income opportunities. Those
trapped in extractive systems often fail to deliver these essentials.

The laureates show how colonial history shaped today’s institutions. In

some colonies, institutions were built to exploit local populations, while
others (usually where Europeans settled permanently) developed more
inclusive systems. Over time, these differences created deep gaps in
prosperity and human development.

Their research helps us understand why former colonies like Nigeria

(with extractive institutions) have low HDI, while countries like South
Korea (which built inclusive institutions after colonial rule) have seen
rapid progress in health, education, and living standards.

In short, strong, inclusive institutions are not just about economic

growth—they are fundamental to human well-being.
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Limitations of the HDI

There are criticisms of the HDI. It is a simplification and an admittedly limited
evaluation of human development. The HDI does not specifically reflect
quality-of-life factors, such as empowerment movements or overall feelings of
security.

Missing Factors
The HDI is calculated from only three factors of human well-being. It fails to
take into account other measures of development and well-being such as
inequality, poverty, security, and gender or ethnic disparities.1

For example, a country could receive a high HDI score primarily because it
has a high GNI per capita. But it might have achieved that high GNI by
marginalizing certain genders or ethnic classes

Correlated Factors
Critics argue that the HDI assigns weights to certain factors that are equal
tradeoffs when these measurements may not always be equally valuable. For
example, countries could achieve the same HDI through different
combinations of life expectancy and GNI per capita. This would imply that a
person's life expectancy has an economic value.

The HDI also correlates factors that are more common in developed
economies. For example, a higher level of education would tend to lead to
higher GNI per capita. Critics argue that including two highly correlated values
instead of choosing just one can be misleading.

Diminishing Marginal Returns

The principle of diminishing marginal returns is used on the income component (e.g. the first
₹20,000 earned is seen as more important than the next ₹20,000 and so on), but it should be
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used on the education and health components as well because in the current measure each
year of age or education is seen as equally important.

Student’s Key Takeaways

When we talk about the problems with the Human Development Index (HDI),

we should also think about other tools and ideas used in international

development that might be outdated or not working well. Like many fields,

international development can be slow to improve. To make real progress, we

need to clearly see what’s not working so we can fix it. Big problems like

poverty and disease will only get worse with growing populations and climate

change. That’s why it’s more important than ever to look closely at the
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weaknesses in our current system—like the HDI—and find better ways to solve

the challenges of today and tomorrow.