Human Development Index

Human Development Index (HDI)  is a measure of welfare developed by the United Nations Development Programme (UNDP) aimed at categorising countries based on their level of development. HDI overcomes some of the shortcomings of the Gross Domestic Product (GDP) as a measure of the well-being or living standards of a country’s citizens. GDP is just a quantitative measure of a country’s output; it does not consider many factors that can positively or negatively affect people’s well-being. For example, GDP does not account for the effect of air pollution arising from production on people’s welfare.

HDI combines three indicators of economic development, namely life expectancy at birth, education and average income. The combination of these indicators produces a number between zero and one; the closer a country’s HDI value is to one, the more developed it is and the closer it is to zero, the less developed a country it is. The HDI value facilitates the classification of countries into four groups: Very High Human Development, High Human Development, Medium Human Development and Low Human Development.  

Life expectancy at birth
This is the average number of years a newborn is expected to live for. It is a health measure that determines whether the life-time of a country’s population is short or long. A life expectancy index is computed from this.

Education
HDI uses an education index to determine how knowledgeable or well-read the population is. It considers the mean year of schooling of adults aged 25 years and above and the expected years of schooling for school-entering age children. 

Gross National Income (GNI) per capita
This is the average income attributable to each citizen of a country. It determines the ability to maintain an acceptable living standard. GNI Per Capita is obtained when the GNI is divided by the population. GNI is the income realised by the citizens of a country living at home and abroad. GNI Per Capita is adjusted using Purchasing Power Parity (PPP) in order to remove the impact of differences in price levels among the countries considered.  A GNI index is computed from this.

Limitations of HDI
The HDI is a composite measure of welfare incorporating three areas of education, life expectancy and GNI Per Capita. It does not consider many other indicators of development such as poverty, environmental pollution, distribution of income, population growth rate and economic structure.