The document discusses the relationship between human development and economic development, highlighting the limitations of GDP as a sole indicator of progress, which often overlooks the well-being of citizens. It introduces the Human Development Index (HDI) as a more comprehensive measure that considers life expectancy, education, and income levels, while also addressing its own limitations. Additionally, it presents India's current HDI ranking and the option of using the Happiness Index as an alternative measure of social well-being.

1. Human Development – The Economic Aspect –
PART - I
DR.M.MADHAVAN,
ASSISTANT PROFESSOR OF ECONOMICS
ARIGNAR ANNA GOVERNMENT ARTS COLLEGE, NAMAKKAL
PAPER PRESENTED
AT
ROUND TABLE MEETING ON HUMAN DEVELOPMENT : FROM INDIAN PERSPECTIVE
ON 27/03/2018
ORGANIZED BY
DEPARTMENT OF SOCIOLOGY, PERIYAR UNIVERSITY, SALEM, INDIA

2. INTRODUCTION
 The development of an economy should be measured properly.
 If we know the progress of an economy, then planning for the economy will be
possible.
 Economic development of a nation is based on Human development of that
nation.
 How can we estimate the economic development of a nation?
 One person may define progress by the increase in his material wealth.
 Another person may define, the attainment of a college degree or maintaining a healthy
well-being may be more important.

3. GDP
 In the early 1930s, Famous economist Simon Kuznets developed the method
of measurement – the Gross Domestic Product (GDP).
 This measures the size of an economy by adding up the value of goods and
services produced within the country during a period of time.
 Using the expenditure approach,
 GDP = Consumption + Gross Investment + Government Spending + (exports –
imports),
 or, GDP = C + I + G + (X-M).

4. Who use GDP as the indicator for growth?
 Most countries use GDP to measure standard of living.
 Economists,
 Policymakers,
 International development agencies and
 even the media use it as an indicator of the economic health of a nation.
 The advantages offered by GDP is that it is widely and
frequently used and its data requirements are readily
available.

5. Whether GDP is the Only Indicator for Growth?
 The countries at the top of the GDP list take the lead in
terms of total economic activity taking place within their
boundaries.
 It does not necessarily mean that their citizens are better off
than the rest of the world in terms of overall well-being.

6. INDIA AND GDP
 India is the sixth largest economy in the world with
a nominal GDP of $2.45 trillion.
 The country ranks third in GDP in terms
of purchasing power parity at $9.49 trillion.
 Is it really indicate the India’s Economic
Development?

7. Limitations and Disadvantages of GDP.
 The activities that have a negative impact on the people’s well-being could end up being recorded
as positive contributions to the GDP.
 Take for instance, crime. Rising criminal activities can increase the country’s GDP through greater
expenditures toward maintaining law and order (e.g., hiring of additional police members,
purchase of guns, prisons, etc).
 GDP is increased when trees are cut down for lumber and other uses. But the negative impact of
deforestation is not taken into consideration.
 As divorce rates increase, so too does the related spending on litigation, lawyers’ fees and the
establishment of separate households. At the same time the emotional and psychological impact
of divorce on the individuals concerned are not considered.
 GDP is also criticized because it does not take into consideration other aspects that define human
well-being like life expectancy and educational attainment.

8. What is the Alternative Method?
 Human Development Index or HDI
 The Human Development Index (HDI) is a statistical tool
used to measure a country's overall achievement in its
social and economic dimensions. The social and economic
dimensions of a country are based on the health of
people, their level of education attainment and their
standard of living.
 Pakistani economist Mahbub ul Haq created HDI in 1990 which
was further used to measure the country's development by the
United Nations Development Program (UNDP)

9. The Human Development Index
 The Human Development Index examines three important criteria of economic development (life
expectancy, education and income levels) and uses this to create an overall score between 0 and 1.
 1 indicates a high level of economic development, and 0 a very low level.
 The HDI combines:
 Life Expectancy Index. Average life expectancy compared to a global expected life expectancy.
 Education Index
 mean years of schooling
 expected years of schooling
 Income Index (GNI at PPP)
 A country scores higher HDI when the lifespan is higher, the education level is higher, and the GDP per
capita is higher. The HDI was developed by Pakistani economist Mahbub ul Haq for the UNDP.

10. LIMITATIONS OF HDI
 Wide divergence within countries. For example, countries like China and Kenya have widely different HDI
scores depending on the region in question. (e.g. north China poorer than south-east, Tamil Nadu and
Bihar )
 HDI reflect long-term changes (e.g. life expectancy) and may not respond to recent short-term changes.
 Higher national wealth does not indicate welfare. GNI may not necessarily increase economic welfare; it
depends on how it is spent. For example, if a country spends more on military spending – this is reflected
in higher GNI, but welfare could actually be lower.
 Also, higher GNI per capita may hide widespread inequality within a country. Some countries with higher
real GNI per capita have high levels of inequality (e.g. Russia, Saudi Arabia)
 However, HDI can highlight countries with similar GNI per capita but different levels of economic
development.
 Economic welfare depends on several other factors, such as – threat of war, levels of pollution, access to
clean drinking water e.t.c.

11. HDI AND INDIA
 India slipped down one place from 130 to 131 among the 188 countries
ranked in terms of human development, says the 2016 Human Development
Report (HDR) released by the United Nations Development Programme (UNDP).
 Among SAARC nations, it’s third behind Sri Lanka, Maldives
Source (The Hindu, MARCH 22, 2017)

12. HDI AND INTERNATIONAL ECONOMY

13. COMPONENTS OF HDI SCORE FOR THE
TOP 10 ECONOMIES DURING 2011
(HDI)
Life
expectancy at
birth
Mean years
of schooling
Expected
years of
schooling
(GNI) per capita
HDI rank Value (years) (years) (years)
(Constant 2005
PPP$)
2011 2011 2011a 2011a 2011
1 Norway 0.943 81.1 12.6 17.3 47,557
2 Australia 0.929 81.9 12.0 18.0 34,431
3 Netherlands 0.910 80.7 11.6 b 16.8 36,402
4 United States 0.910 78.5 12.4 16.0 43,017
5 New Zealand 0.908 80.7 12.5 18.0 23,737
6 Canada 0.908 81.0 12.1 b 16.0 35,166
7 Ireland 0.908 80.6 11.6 18.0 29,322
8 Liechtenstein 0.905 79.6 10.3 c 14.7 83,717
9 Germany 0.905 80.4 12.2 b 15.9 34,854
10 Sweden 0.904 81.4 11.7 b 15.7 35,837

14. HDI – EDUCATION
HDI Rank
(2015)
Country 1990 1995 2000 2005 2010 2015
73 Sri Lanka 11.3 11.9 12.5 13.1 13.6 14
105 Maldives 8.5 11.8 12 11.8 12.7
131 India 7.6 8.2 8.3 9.7 10.8 11.7
132 Bhutan 5.4 6.4 7.6 9.6 11.9 12.5
139 Bangladesh 5.7 6.6 7.5 8.4 9.4 10.2
144 Nepal 7.5 8.1 9 9.6 12 12.2
147 Pakistan 4.6 5 5.4 6.5 7.5 8.1
169 Afghanistan 2.6 4.2 5.9 8.1 9.5 10.1

15. EXPECTED YEARS OF SCHOOLING
11.3
11.9
12.5
13.1
13.6
14
8.5
11.8 12 11.8
12.7
7.6
8.2 8.3
9.7
10.8
11.7
5.4
6.4
7.6
9.6
11.9
12.5
5.7
6.6
7.5
8.4
9.4
10.2
7.5
8.1
9
9.6
12 12.2
4.6
5
5.4
6.5
7.5
8.1
2.6
4.2
5.9
8.1
9.5
10.1
0
2
4
6
8
10
12
14
16
1990 1995 2000 2005 2010 2015
Expected years of schooling
Sri Lanka Maldives India Bhutan Bangladesh Nepal Pakistan Afghanistan

16. ALTERNATIVE FOR HDI
 HAPPINESS INDEX
 India was ranked on the 122nd spot,
down from 118 in the 2013-2015
report.
 Happiness on the parameters of GDP
per capita, social support, healthy life
expectancy, freedom to make life
choices, generosity and perceptions of
corruption.
Rank County Index
1 Norway 7.54
2 Denmark 7.42
3 Iceland 7.5
4 Switzerland 7.49
5 Finland 4.47
6 Netherlands 7.38
7 Canada 7.32
8 New Zealand 7.32
9 Sweden 7.28
10 Austraila 7.28
122 India 4.30

17. THANK YOU
manimadhavan@gmail.com