What changes have been made in the HDI in the year 2010?

   Changes made in Human Development Index- 2010
     

The HDI is a composite index that measures  average achievements in three basic aspects of human development such as health, knowledge, and income. The concept of human development is much broader than any index can measure. This is a new way of measuring development.  It was first developed by the late Pakistani economist Mahbub ul Haq with the collaboration of the Nobel laureate Amartya Sen and other leading development thinkers for the first HDR in 1990. Few years ago the increase in GDP was the only parameter for measuring development and growth. A sustained and long term increase national or per capita income was the sole parameter of development. But later on it was discovered that even after sustained increase in income it has not percolated and that people were not happy. The human development index was prepared to introduced as an alternative to the conventional measures of national development, such as level of income and the rate of economic growth. The main purpose of economic development is to make our life more comfortable, healthy and happy. This is measured by Human Development Index.

Meaning of HDI

Under the previous HDI formula, three parameters were used for measuring human development:

(i)                health was measured by life expectancy at birth,

(ii)              education or "knowledge" was measured by a combination of the adult literacy rate and school enrolment rates (for primary through university years), and

(iii)            Income or standard of living was measured by Gross Domestic Product (GDP) per capita adjusted for purchasing-power parity (PPP US$).

In the HDR 2010

(i)             Health is still measured by life expectancy at birth.

(ii)           But education or knowledge was measured in 2010 HDI by combining the expected years of schooling for a school-age child in a country today with the mean years of prior schooling for adults aged 25 and older.

(iii)         The income measurement, meanwhile, has changed from purchasing-power-adjusted per capita GDP to purchasing-power-adjusted per capita Gross National Income (GNI); GNI includes remittances and foreign assistance income, for example, providing a more accurate economic picture of many developing countries. 

(iv)         Human Development Report (HDR) 2010 contains several significant changes. Indicators to measure the three dimensions of Human Development Index (HDI) have been changed:

          (a)Gender-related Development Index (GDI) and Gender Empowerment Index have been replaced by Gender Inequality Index (GII) and

         (b) Human Poverty Index has been replaced by Multi-dimensional Poverty Index.

         (c)Inequality-adjusted HDI (IHDI) has been introduced for the first time.

Between 1980 and 2010, India's HDI rose by 1.6% annually from 0.320 to 0.519. While India's HDI value has improved over time, the rank has not improved as much as compared to other developing countries. 

1. Income Cap lifted: GDP in the previous HDI was capped at $40,000 and was logarithmically transformed. The original HDI placed this cap on income to reflect the view that beyond some upper set amount, additional income does not expand human development opportunities. Over the years, it has been observed that the discriminatory power of capped income has been weakened, especially for discrimination between the very high developed countries. The caps in each dimension are lifted, so one can say that they are equal to the observed maxima over the period (1980-2010) for which HDI trends are presented.
   
   This year, the dimension indicators are transformed using the maximum levels for all sub-components observed over the period for which HDI trends are presented (from 1980). The minimum levels for the dimension indicators are set as follows: life expectancy at 20 years; both education variables at 0; and GNI per capita at PPP $163, which is the observed minimum. The choice of minimum values is motivated by the principle of natural zeros below which there is no possibility for human development.
2. Gender Disparity Index: GDI and GEM, introduced in HDR in 1995, capture inequalities in achievements between women and men. However, they have been replaced by the Gender Inequality Index (GII) in the 2010 report which is a composite measure reflecting inequality in achievements between women and men in three dimensions and five indicators: (i) reproductive health (maternal mortality and adolescent fertility), (ii) empowerment (parliamentary representation and educational attainment) and (iii) the labor market (labor force participation). It varies between 0 (when women and men fare equally) and 1 (when men or women fare poorly compared to the other in all dimensions). The GII is designed to reveal the extent to which national human development achievements are eroded by gender inequality, and to provide empirical foundations for policy analysis and advocacy efforts.
3. Choices: If human development is about enlarging choices, poverty means that opportunities and choices most basic are denied. HPI pioneering in its day used country averages to reflect aggregate deprivations in health, education, and standard of living. It could not identify specific individuals, households or larger groups of people as jointly deprived. Multidimensional Poverty Index (MPI) replaces HPI which complements money-based measures by considering multiple deprivations and their overlap. It measures deprivation in the same three dimensions but with a different set of indicators - health (nutrition and mortality), education (years of schooling and children enrolled) and living standards (assets, floor, electricity, water, toilet and cooking fuel). The MPI can be broken down by indicator to show how the composition of multidimensional poverty changes for different regions, ethnic groups and so on, with useful implications for policy.
4. The 2010 report introduces the Inequality-adjusted HDI (IHDI), a measure of the level of human development of people in a society that accounts for inequality. Under perfect equality, the HDI and the IHDI are equal. When there is inequality in the distribution of health, education and income, the HDI of an average person in a society is less than the aggregate HDI; the lower the IHDI (and the greater the difference between it and the HDI), the greater the inequality.