Human Development Report by UNDP
HDI: Addressing India’s Subnational Human Development
Note4Students
From UPSC perspective, the following things are important :
Prelims level : HDI and India's rank
Mains level : HDI and India's performance analysis
Central Idea
- India is now one of the fastest-growing economies globally. However, this growth has not resulted in a corresponding increase in its Human Development Index (HDI). According to the Human Development Report of 2021-22, India ranks 132 out of 191 countries, behind Bangladesh (129) and Sri Lanka (73).
Facts for Prelims: Human Development Index (HDI)
- Composite statistical measure by UNDP: The HDI is a composite statistical measure created by the United Nations Development Programme to evaluate and compare the level of human development in different regions around the world.
- As an alternative with broader aspects: It was introduced in 1990 as an alternative to conventional economic measures such as Gross Domestic Product (GDP), which do not consider the broader aspects of human development.
- Aspects: The HDI assesses a country’s average accomplishment in three aspects 1. A long and healthy life, 2, knowledge, and 3. A decent standard of living.
- India ranks 132 out of 191 countries in the HDI 2021.
The subnational HDI: A new index
- Given India’s large size and population, it’s critical to address subnational or state-wise disparities in human development.
- A new index has developed by using the methodology suggested by the UNDP and the National Statistical Office (NSO), which measures human development on a subnational level for 2019-20.
HDI Calculation
- The HDI is calculated using four indicators: life expectancy at birth, mean years of schooling, expected years of schooling, and Gross National Income (GNI) per capita.
- The subnational HDI uses GSDP per capita as a proxy indicator for GNI since GNI per capita estimates are unavailable at the subnational level.
- The methodology involves calculating the geometric mean of the normalised indices for the three dimensions of human development while applying the maximum and minimum values recommended by the UNDP and NSO.
Subnational HDI Findings
- The subnational HDI shows that while some states have made considerable progress, others continue to struggle. Delhi occupies the top spot and Bihar occupies the bottom spot.
- The five states with the highest HDI scores are Delhi, Goa, Kerala, Sikkim, and Chandigarh. Nineteen states, including Kerala, Maharashtra, Tamil Nadu, Haryana, Punjab, Telangana, Gujarat, and Andhra Pradesh, have scores ranging between 0.7 and 0.799 and are classified as high human development states.
- The bottom five states are Bihar, Uttar Pradesh, Madhya Pradesh, Jharkhand, and Assam, with medium levels of human development.
Reasons for Discrepancies
- The economic growth has been unevenly distributed, with the top 10% of the Indian population holding over 77% of the wealth. This has resulted in significant disparities in access to basic amenities, healthcare, and education.
- While India has made significant progress in reducing poverty and increasing access to healthcare and education, the quality of such services remains a concern.
Conclusion
- The government needs to prioritize human development alongside economic growth to ensure that the benefits of growth are more evenly distributed, and it requires a multi-faceted approach to address various issues such as income inequality, gender inequality, access to quality social services, environmental challenges, and social infrastructure investment. India must prioritize investments in human development and job creation, particularly for its youth, to realize its demographic dividend.
Mains Question
Q. Analyze the performance of different states in terms of their Human Development Index (HDI) and suggest measures that could be taken to address the disparities in human development in the country
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Human Development Report by UNDP
Here is how HDI has performed in last 3 decades
Note4Students
From UPSC perspective, the following things are important :
Prelims level : particulars of report
Mains level : human development
Context
- India, belonging to the medium HDI category, shows dimensional inequalities similar to or slightly below the average figures in the category, except in the case of education where it is high and closer to the low HDI countries. The inequalities in health and education are more than twice that of the very high and high HDI categories.
Why in news?
- The bad news for India is that its global HDI rank has slipped from 129 in 2019 to 131 in 2020 and to 132 in 2021-22.
What is the meaning of human development?
- Human development is defined as the process of enlarging people’s freedoms and opportunities and improving their well-being. Human development is about the real freedom ordinary people have to decide who to be, what to do, and how to live.
What is meant by Human Development Index?
- The HDI is a summary measure of human development. The HDI is a summary composite measure of a country’s average achievements in three basic aspects of human development: health, knowledge and standard of living.
Who publishes HDI?
- The Human Development Report (HDR) is an annual Human Development Index report published by the Human Development Report Office of the United Nations Development Programme (UNDP).
Dimensions of the Human Development Index
- Long and healthy life: The long and healthy life dimension is measured by life expectancy at birth. The life expectancy at birth is a statistical measure that an average individual is expected to live based on certain demographic factors such as the year of birth and current age.
- Education: This is a second dimension in the HDI. The indicators of education are the expected years of schooling and the mean years of schooling. According to the UN, the average maximum years of schooling is 18 years, while the mean maximum years of schooling is 15 years.
- Standard of living: The standard of living is usually measured by the gross national income (GNI) per capita. The GNI indicates the total domestic and foreign output created by the residents of a certain country.
What are the 4 indicators of HDI?
- Mean years of schooling
- Expected years of schooling
- Life expectancy at birth
- Gross national income (GNI) per capita
Which Countries Have the Highest HDI?
In the latest HDI ranking, from 2022, Switzerland finished first with an HDI value of 0.962.
Issues in HDI
(1) An incomplete indicator
- Human development is incomplete without human freedom and that while the need for qualities judgement is clear; there is no simple quantitative measure available yet to capture the many aspects of human freedom.
- HDI also does not specifically reflect quality of life factors, such as empowerment movements or overall feelings of security or happiness.
(2) Limited idea of development
- The HDI is not reflecting the human development idea accurately.
- It is an index restricted to the socio-economic sphere of life; the political and civil spheres are in the most part kept separate.
- Hence there is a sub-estimation of inequality among countries, which means that this dimension is not being taken into consideration appropriately.
(3) A vague concept
- Concerning data quality and the exact construction of the index HDI is conceptually weak and empirically unsound.
- This strong critic comes from the idea that both components of HDI are problematic. The GNP in developing countries suffers from incomplete coverage, measurement errors and biases.
- The definition and measurement of literacy are different among countries and also, this data has not been available since 1970 in a significant number of countries.
(4) Data quality issues
- The HDI, as a combination of only four relatively simple indicators, doesn’t only raise a questions what other indicators should be included, but also how to ensure quality and comparable input data.
- It is logical that the UNDP try to collect their data from international organizations concentrating in collecting data in specific fields.
- Quality and trustworthiness of those data is disputable, especially when we get the information from UN non-democratic members, as for example Cuba or China.
(5) A tool for mere comparison
- The concept of HDI was set up mainly for relative comparison of countries in one particular time.
- HDI is much better when distinguishing between countries with low and middle human development, instead of countries at the top of the ranking.
- Therefore, the original notion was not to set up an absolute ranking, but let’s quite free hands in comparison of the results.
(6) Development has to be greener
- The human development approach has not adequately incorporated environmental conditions which may threaten long-term achievements on human development. The most pervasive failure was on environmental sustainability.
- However, for the first time in 2020, the UNDP introduced a new metric to reflect the impact caused by each country’s per-capita carbon emissions and its material footprint.
- This is Planetary Pressures-adjusted HDI or PHDI. It measured the amount of fossil fuels, metals and other resources used to make the goods and services it consumes.
(7) Wealth can never equate welfare
- 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.
Importance of HDI
- Multidimensionality: It is one of the few multidimensional indices as it includes indicators such as literacy rate, enrolment ratio, life expectancy rate, infant mortality rate, etc.
- True yardstick: It acts as a true yardstick to measure development in real sense.
- Helps in measuring a nation’s well-being: Unlike per capital income, which only indicates that a rise in per capital income implies economic development; HDI considers many other vital social indicators and helps in measuring a nation’s well-being.
Value addition line
People are the real wealth of a nation. The basic objective of development should be to create an enabling environment for people to live long, healthy and creative lives. This may appear to be a simple truth.
Conclusion
- To sum up, the introduction of the HDI three decades ago was an early attempt to address the shortcomings in conventional measures of wellbeing.
- The HDI has continued to attract widespread attention and motivates the work of activists, scholars and political leaders around the world.
- The HDI compels us to ask what matters more, the quantitative expansion of an economy, or the qualitative improvement in the capabilities of society.
- Indeed the revival of interest in this subject at the highest levels of government is the need of the hour.
Mains question
Q. What do you understand by human development? Critically analyse the human development index given by UNDP.
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Human Development Report by UNDP
India ranks 132 in HDI as score drops
Note4Students
From UPSC perspective, the following things are important :
Prelims level : HDI
Mains level : Read the attached story
India ranks 132 out of 191 countries in the Human Development Index (HDI) 2021, after registering a decline in its score over two consecutive years for the first time in three decades.
What is Human Development Index (HDI)?
- The HDI combines indicators of life expectancy, education or access to knowledge and income or standard of living, and captures the level and changes to the quality of life.
- The index initially launched as an alternative measure to the gross domestic product, is the making of two acclaimed economists from Pakistan and India, namely Mahbub ul Haq and Amartya Sen.
- It stresses the centrality of human development in the growth process and was first rolled out by the United Nations Development Programme in 1990.
Dimensions of the Human Development Index – HDI
- The idea that progress should be conceived as a process of enlarging people’s choices and enhancing their capabilities is the central premise of the HDI.
- Since its launch, the HDI has been an important marker of attempts to broaden measures of progress.
- The HDI considers three main dimensions to evaluate the development of a country:
- Long and healthy life
- Education
- Standard of living
Limitations of HDI
HDR has been always disputable and has caught the public-eye, whenever it was published. It has many reasons.
One of them is that the concept of human development is much deeper and richer than what can be caught in any index or set of indicators. Another argument is that its concept has not changed since 1990 when it was also defined in the first.
(1) An incomplete indicator
- Human development is incomplete without human freedom and that while the need for qualities judgement is clear; there is no simple quantitative measure available yet to capture the many aspects of human freedom.
- HDI also does not specifically reflect quality of life factors, such as empowerment movements or overall feelings of security or happiness.
(2) Limited idea of development
- The HDI is not reflecting the human development idea accurately.
- It is an index restricted to the socio-economic sphere of life; the political and civil spheres are in the most part kept separate.
- Hence there is a sub-estimation of inequality among countries, which means that this dimension is not being taken into consideration appropriately.
(3) A vague concept
- Concerning data quality and the exact construction of the index HDI is conceptually weak and empirically unsound.
- This strong critic comes from the idea that both components of HDI are problematic. The GNP in developing countries suffers from incomplete coverage, measurement errors and biases.
- The definition and measurement of literacy are different among countries and also, this data has not been available since 1970 in a significant number of countries.
(4) Data quality issues
- The HDI, as a combination of only four relatively simple indicators, doesn’t only raise a questions what other indicators should be included, but also how to ensure quality and comparable input data.
- It is logical that the UNDP try to collect their data from international organizations concentrating in collecting data in specific fields.
- Quality and trustworthiness of those data is disputable, especially when we get the information from UN non-democratic members, as for example Cuba or China.
(5) A tool for mere comparison
- The concept of HDI was set up mainly for relative comparison of countries in one particular time.
- HDI is much better when distinguishing between countries with low and middle human development, instead of countries at the top of the ranking.
- Therefore, the original notion was not to set up an absolute ranking, but let’s quite free hands in comparison of the results.
(6) Development has to be greener
- The human development approach has not adequately incorporated environmental conditions which may threaten long-term achievements on human development. The most pervasive failure was on environmental sustainability.
- However, for the first time in 2020, the UNDP introduced a new metric to reflect the impact caused by each country’s per-capita carbon emissions and its material footprint.
- This is Planetary Pressures-adjusted HDI or PHDI. It measured the amount of fossil fuels, metals and other resources used to make the goods and services it consumes.
(7) Wealth can never equate welfare
- 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.
Significance of HDI
- It is one of the few multidimensional indices as it includes indicators such as literacy rate, enrollment ratio, life expectancy rate, infant mortality rate, etc.
- It acts as a true yardstick to measure development in real sense.
- Unlike per capital income, which only indicates that a rise in per capital income implies economic development; HDI considers many other vital social indicators and helps in measuring a nation’s well-being.
- It helps as a differentiating factor to distinguish and classify different nations on the basis of their HDI ranks.
Way forward
- Both sustainable development and poverty eradication are both long-term and urgent endeavours, requiring not only the gradual and substantial redirection of country policies but a rapid response to pressing problems.
- Ideally, sustainable development could provide an overarching framework within which all sub-goals (eg poverty eradication, social equality, ecosystem maintenance, climate compatibility) are framed.
- It is not a subset of development; it is development (in a modern world of resource limits).
- Environmental issues are not one factor among many but the meta-context within which poverty and other goals are sought.
- Investing more in public research could lead to technological solutions to poverty and sustainability problems becoming more rapidly and openly available.
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Human Development Report by UNDP
Human Development Index (HDI) 2019
Note4Students
From UPSC perspective, the following things are important :
Prelims level : HDI
Mains level : Human Development
India dropped two ranks in the United Nations’ Human Development Index this year, standing at 131 out of 189 countries.
Try this PYQ:
Which one of the following is not a sub-index of the World Bank’s ‘Ease of Doing Business Index’?
(a) Maintenance of law and order
(b) Paying taxes
(c) Registering property
(d) Dealing with construction permits
Human Development Index (HDI)
- HDI is a statistical tool used to measure a country’s overall achievement in its social and economic dimensions.
- It is one of the best tools to keep track of the level of development of a country, as it combines all major social and economic indicators that are responsible for economic development.
- 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).
- Every year UNDP ranks countries based on the HDI report released in their annual report.
Various indicators under HDI
- Calculation of the index combines four major indicators: life expectancy for health, expected years of schooling, mean of years of schooling for education and GNI per capita for the standard of living.
For the first time: PHDI
- For the first time, the UNDP introduced a new metric to reflect the impact caused by each country’s per-capita carbon emissions and its material footprint.
- This is Planetary Pressures-adjusted HDI or PHDI.
- It measured the amount of fossil fuels, metals and other resources used to make the goods and services it consumes.
- The report found that no country has yet been able to achieve a very high level of development without putting a huge strain on natural resources.
Highlights of the 2019 Report
- Norway, which tops the HDI, falls 15 places if this metric is used, leaving Ireland at the top of the table.
- In fact, 50 countries would drop entirely out of the “very high human development group” category, using this new metric PHDI.
- Australia falls 72 places in the ranking, while the US and Canada would fall 45 and 40 places respectively, reflecting their disproportionate impact on natural resources.
- The oil and the gas-rich Gulf States also fell steeply. China would drop 16 places from its current ranking of 85.
Indian scenario
- If the Index were adjusted to assess the planetary pressures caused by each nation’s development, India would move up eight places in the rankings.
- China’s net emissions (8 gigatonnes) are 34% below its territorial emissions (12.5 gigatonnes) compared with 19% in India and 15% in Sub-Saharan Africa.
Human Development Report by UNDP
World Bank’s Human Capital Index 2020
Note4Students
From UPSC perspective, the following things are important :
Prelims level : HCI, HDI
Mains level : Impact of coronovirus outbreak on Human Capital
India has been ranked at the 116th position in the latest edition of the World Bank’s annual Human Capital Index that benchmarks key components of human capital across countries.
Try this PYQ:
Q.As per UN-Habitat’s Global Report on Human Settlements 2009, which one among the following regions has shown the fastest growth rate of urbanization in the last three decades?
(a) Asia
(b) Europe
(c) Latin America and Caribbean
(d) North America
Highlights of the 2020 rankings
- The 2020 Human Capital Index update includes health and education data for 174 countries — covering 98 per cent of the world’s population — up to March 2020.
- It provides a pre-pandemic baseline on the health and education of children, with the biggest strides made in low-income countries.
Impact of the pandemic
- The analysis shows that pre-pandemic, most countries had made steady progress in building the human capital of children, with the biggest strides made in low-income countries.
- The pandemic puts at risk the decade’s progress in building human capital, including the improvements in health, survival rates, school enrollment, and reduced stunting.
- The economic impact of the pandemic has been particularly deep for women and for the most disadvantaged families, leaving many vulnerable to food insecurity and poverty.
- Due to the pandemic’s impact, most children — more than 1 billion — have been out of school and could lose out, on average, half a year of schooling, adjusted for learning, translating into considerable monetary losses.
- Data also shows significant disruptions to essential health services for women and children, with many children missing out on crucial vaccinations.
India’s performance
- India’s score increased to 0.49 from 0.44 in 2018, as per the Human Capital Index report released by the World Bank.
- Last year, India had raised “serious reservations” over the Human Capital Index, wherein India was ranked 115 out of 157 countries.
- This year India finds itself at 116th from among 174 countries.
Back2Basics: Human Capital Project
- As part of this World Development Report (WDR), the World Bank has launched a Human Capital Project (HCP).
- The HCP programme is claimed to be a program of advocacy, measurement, and analytical work to raise awareness and increase demand for interventions to build human capital.
- There are three components of HCP:
- a cross-country human capital measurement metric called the Human Capital Index (HCI),
- a programme of measurement and research to inform policy action
- a programme of support for country strategies to accelerate investment in human capital.
Human Capital Index (HCI)
- The HCI has been constructed for 157 countries.
- It claims to seek to measure the amount of human capital that a child born today can expect to attain by age 18.
- The HCI has three components:
- Survival: as measured by under-5 mortality rates
- Expected years of Quality-Adjusted School: which combines information on the quantity and quality of education
- Health environment: Using two proxies of (a) adult survival rates and (b) the rate of stunting for children under age 5.
HDI vs. HCI
- UNDP constructs Human Development Index (HDI) for several years.
- The HCI uses survival rates and stunting rate instead of life expectancy as a measure of health, and quality-adjusted learning instead of merely years of schooling as a measure of education.
- HCI also excludes per capita income whereas the HDI uses it.
Human Development Report by UNDP
Human Development Report (HDR) 2019
Note4Students
From UPSC perspective, the following things are important :
Prelims level : Human Development Index (HDI)
Mains level : India's performance in HDR and various pulling factors
The Human Development Report (HDR) for 2019 has been released by the United Nations Development Programme (UNDP).
Global scene
- Norway, Switzerland, Ireland occupied the top three positions in that order.
- Germany is placed fourth along with Hong Kong, and Australia secured the fifth rank on the global ranking.
- Among India’s neighbours, Sri Lanka (71) and China (85) are higher up the rank scale while Bhutan (134), Bangladesh (135), Myanmar (145), Nepal (147), Pakistan (152) and Afghanistan (170) were ranked lower on the list.
India’s performance
- India ranks 129 out of 189 countries on the 2019 HDI — up one slot from the 130th position last year.
- India’s HDI value increased by 50% (from 0.431 to 0.647), which places it above the average for other South Asian countries (0.642).
- However, for inequality-adjusted HDI (IHDI), India’s position drops by one position to 130, losing nearly half the progress (.647 to .477) made in the past 30 years. The IHDI indicates percentage loss in HDI due to inequalities.
46% growth in S.Asia
- As per the report, South Asia was the fastest growing region in human development progress witnessing a 46% growth over 1990-2018.
- It is followed by East Asia and the Pacific at 43%.
Gender inequality
- The report notes that group-based inequalities persist, especially affecting women and girls and no place in the world has gender equality.
- In the Gender Inequality Index (GII), India is at 122 out of 162 countries. Neighbours China (39), Sri Lanka (86), Bhutan (99), Myanmar (106) were placed above India.
- The report notes that the world is not on track to achieve gender equality by 2030 as per the UN’s SDGs.
- It forecasts that it may take 202 years to close the gender gap in economic opportunity — one of the three indicators of the GII.
New inequalities on rise
- The report presents a new index indicating how prejudices and social beliefs obstruct gender equality, which shows that only 14% of women and 10% of men worldwide have no gender bias.
- The report notes that this indicates a backlash to women’s empowerment as these biases have shown a growth especially in areas where more power is involved, including in India.
- The report also highlights that new forms of inequalities will manifest in future through climate change and technological transformation which have the potential to deepen existing social and economic fault lines.
Back2Basics
Human Development Index (HDI)
- It 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).
- Calculation of the index combines four major indicators: life expectancy for health, expected years of schooling, mean of years of schooling for education and GNI per capita for standard of living.
- Every year UNDP ranks countries based on the HDI report released in their annual report.
- HDI is one of the best tools to keep track of the level of development of a country, as it combines all major social and economic indicators that are responsible for economic development.
Human Development Report by UNDP
[op-ed snap] Nobody speaks to the young
Note4Students
Mains Paper 2: Social Justice| Issues relating to development and management of Social Sector/Services relating to Health, Education, Human Resources.
From UPSC perspective, the following things are important:
Prelims level: Nothing as such.
Mains level: The news-card analyses the issues and challenges of youth of our country, in a brief manner.
Context
- The youth of our country need a sense of purpose and political identity and not sops.
Background
- Sixty per cent of our country is under the age of 30. Yet, there is little substantive participation of our young in defining the direction of the nation.
- The average age of our MPs at 56 years is more than double the median age of 25.
- Statistics are not available for other groups who shape our politics — academics, activists, media — but a quick check of the top names in each area is indicative of similar under-representation of youth.
Issue
- Talk to young people across the country and what stands out is their feeling of being talked at, pushed around, and dismissed.
- Consequently, young people respond to rejection with rejection.
- Ask 10 young people outside of the elite circuit about political developments in the country — most will struggle to respond.
- Refer to political leaders from various fields and ask the youngsters to talk of their stand on some topical issues. They will shrug.
- Name the top public intellectuals in the country and most may not even have heard of them.
- It can be said that young people today are selfish. They are too distracted and lack commitment. But this is, at best, a partial truth.
Youth today is searching for recognition and sense of identity
- The larger political class and process simply have not been able to establish relevance for young people.
- Youth, today, are responding to the cues and incentives around them; and paying attention to those who are reaching out to them.
- Young people are searching for recognition, for an identity in which they can take pride in.
- Because there are no accessible pathways that can help them get recognised in constructive politics, they are choosing other options.
- Association with a celebrity, styling themselves like him/her gives that sense of belonging.
- To be “discovered” in many ways offers a better probability of escaping their circumstances than studying in a dusty college somewhere or working in a dead-end job.
- Thuggery, bullying, majoritarianism offers a sense of power when as a whole there is a dispiriting lack of agency.
Young India cannot be ignored
- We cannot ignore Young India if we care about our democracy.
- Nor can we pick and choose what we want to prioritise — our politics has to be representative of their needs and aspirations.
- We have to talk about the things that matter to them in a language that they understand.
- This means prioritising the educational, employment and identity concerns of young people in our daily discourse and politics.
Challenges
(a) Equal educational opportunity
- Equal educational opportunity has become a purely rhetorical statement.
- Seventy per cent of our higher education is in the private sector and, increasingly, even public universities are getting privatised with the onset of “self-financing” courses making a complete mockery of the role of education as a tool for socio-economic mobility.
- Entire universities are completely notional: There are no classes, students study in coaching centers.
- Three-year courses are taking up to five years to finish.
- The examination system is a complete sham.
- Students are paying exorbitant fees and graduates are saddled with debt without job prospects.
- Yet our focus on these issues is episodic.
- That too, when there is some immediate crisis, despite the fact that students are the most visible face of a progressing India.
(b) Employment
- Similarly, our approach to employment is highly utilitarian.
- Employment is not just about economics, it is also linked to one’s identity.
- Yet there is very little conversation about how to imbue meaning and pride in the lives of those at the lowest end of the work chain.
- We want those who work with us to demonstrate “work ethic” — reliability, punctuality, diligence — but it is unclear what exactly is gained for the young person in being all these three things?
Way Forward
- If we want the vast majority of our young people to imbibe these virtues of collective living, then we need to create those avenues for them where these will be recognised and rewarded.
- We have to acknowledge the essential role of young people in nation-building and create meaningful opportunities for them to engage with politics and governance.
- This is important because young people suffer from additional barriers to entry because of their age and inexperience.
- All of us have a desire for self-expression and to be part of something bigger than ourselves.
- If those of us who have the power to shape platforms and narratives are unable to make our politics representative of the aspirations of the youth, they will simply look for meaning elsewhere.
Human Development Report by UNDP
[op-ed snap] Governing India’s many spaces
Note4Students
Mains Paper 3: Economic Development| Inclusive growth and issues arising from it.
From UPSC perspective, the following things are important:
Prelims level: Basic knowledge of India’s performance at different indices.
Mains level: The news-card analyses India’s performance at three important indices i.e. EDB, HDI and EPI, in a brief manner.
Context
- As the general elections approaches in India, the experts look at the changes since 2014 in three indices for India.
- These are the indices of the ‘Ease of Doing Business’ (EDB), ‘Human Development’ (HDI) and ‘Environmental Performance’ (EPI).
- Published by separate international bodies, they are used to rank the world’s countries according to their performance in the related sphere.
‘Ease of Doing Business’: The business ecosystem
- The EDB, an indicator put out by the World Bank, is meant mainly as an index of the effect of government regulations on running a business.
- It is also meant to reflect the extent of property rights in a society.
- Responses are sought from government officials, lawyers, business consultants, accountants and other professionals involved in providing advice on legal and regulatory compliance.
EDB ranking factors
A country’s ranking is based on the extent to which government regulations facilitate the following:
- starting a business,
- obtaining construction permits,
- getting an electricity connection,
- registering property,
- accessing credit,
- protection of investors,
- paying taxes,
- trading across borders,
- enforcement of contracts and
- resolving insolvency.
India’s performance at EDB rankings since 2014
- The present government has set much at store by India’s improved ranking in terms of the EDB index.
- The improvement is considerable. From a rank of 134 in 2014, India’s rank improved to 77 in 2018.
- As 190 countries were ranked in 2018, India was in the top 50%.
- The position is not spectacular but the improvement is noteworthy.
Limitations and Concerns
- EDB has not been without controversy, with experts suggesting that in the past political bias may have crept into the ranking of countries.
- Perhaps a bigger problem with the EDB is that it measures the effect of government regulations alone.
- While it is important to take this aspect into account, in any situation the ease of doing business is dependent upon other factors too.
- One of these is the availability of ‘producer services’, with electricity, water supply and waste management coming to mind.
- There is little reason to believe that this infrastructure has improved in India in the last five years.
- The Planning Commission used to release data on infrastructural investment, but we have had none since its demise.
Despite all these shortcomings, it is yet important to be concerned with the ease of doing business in India, an aspect that has been given little or no importance in public policy for over 50 years, and to note that the EDB ranking for the country shows significant improvement since 2014.
Human Development Index: A true measure
- It is the result of a rare India-Pakistan collaboration in the global discourse on public policy, having been devised by Amartya Sen and Mahbub ul Haq for the United Nations Development Programme.
- The HDI is a combination of indicators of income, health and education in a country.
HDI’s conceptual basis has been critiqued:
- It has been pointed out that the index combines incommensurate categories, as income, health and education are not substitutes.
- Second, while it does go beyond purely economic measures of progress, in that it looks at the health and education achievements in a population, it can say little about the ‘quality’ of development.
Data can tell us only a part of the story about people’s lives
- For instance, it is increasingly clear that it is not enough simply to count how many children are in school.
- We need also to know whether they are learning anything.
- Nevertheless the HDI has now gained reasonable acceptance globally as indicative of the development strides a country has taken.
India’s performance at HDI rankings since 2014
- India’s ranking at HDI has not altered since 2014.
- India was ranked 130 in 2014, and has remained in the same place out of 185 countries in 2018.
- It is of relevance here that India’s HDI ranking has not improved despite it being the world’s fastest growing major economy in recent years.
- This despite income being a component of the index.
- What this reveals is that an economy can grow fast without much progress in human development.
- Also, India’s HDI position in the bottom third of countries points to how much it needs to progress to earn the label ‘the world’s largest democracy’.
Environmental Performance Index: The Environmental costs
- The EPI is produced jointly by Yale and Columbia Universities in collaboration with the World Economic Forum.
- The index ranks countries on 24 performance indicators across several ‘issue categories’, each of which fit under one of two overarching objectives, namely, environmental health and eco-system vitality.
- The issue categories are air quality, water and sanitation, water resources, agriculture, forests, fisheries, biodiversity and habitat, and climate and energy.
- These metrics are meant to serve as a gauge at a national level of how close countries are to accepted environmental policy goals.
India’s performance at EPI rankings since 2014
- In 2018 India ranked 177 out of 180 countries, having slipped from an already very low rank of 155 in 2014.
- The country is today among the worst performing on the environmental front and its ranking has worsened over the past five years.
Implications
- We now have indicators of the progress India has made in the past five years in the three crucial spheres of business, human development and the natural environment.
- A clear picture emerges whereby the government has aggressively pursued an improvement in the business environment.
- This appears to have yielded fruit in terms of an improvement in the EDB index.
- However, at a time when it has been the fastest growing economy in the world, India’s rank on human development has remained unchanged and on environmental performance has slipped close to the last place.
Conclusion
- The present government has marginally lowered health and education expenditure as a share of national income and distinctly lowered environmental standards.
- An instance of the latter would be the Coastal Regulation Zone Notification of 2018 which allows construction and tourism development on land earlier considered inviolable due to its ecological value.
- This de-regulation is a setback for India.
- It is only one instance of the failure to recognise the plunder of India’s natural capital taking place at an accelerated pace.
- Rankings by themselves do not reveal the level of attainment but they do convey how far a country is from the global frontier.