What are the 3 components of HDI what is its significance?

How can we measure what progress a country is making in its economic development? Is GDP alone a suitable measure of development? The United Nations thinks not and, since 1990, it has published an alternative measure of economic development - the Human Development Index (shortened to HDI).

The United Nations Development Programme (UNDP) publishes the Human Development Index each year.

The key features to remember about the HDI are:

HDI focuses on three key measures of human development: longevity (how long people live), basic education and minimal income

The HDI tracks progress made by countries in improving these three basic development outcomes

The inclusion of education and health indicators is a sign of successful policies in providing access to merit goods such as health care, sanitation and education

The three measures in the index are:

1. Knowledge: First an educational component made up of two statistics – mean years of schooling and expected years of schooling

2. Long and healthy life: Second a life expectancy component is calculated using a minimum value for life expectancy of 25 years and maximum value of 85 years

3. A decent standard of living: The final element is gross national product (GNP per capita adjusted to purchasing power parity standard (PPP)

How Countries are Classified Using the HDI

The UNDP classifies each country into one of three development groups:

Low human development for HDI scores between 0.0 and 0.5, Medium human development for HDI scores between 0.5 and 0.8 High human development for HDI scores between 0.8 and 1.0

Countries with the Highest HDI

The data from the 2015 HDI showing the countries with the highest HDI is shown below:

Countries with the Lowest HDI

Not surprisingly, some of the poorest countries appear in the list of the lowest HDI:

Some Key Features of Changes in the HDI

The world average HDI rose to 0.68 in 2010 from 0.57 in 1990 The fastest progress has been in East Asia & the Pacific, followed by South Asia and Arab States. All but 3 of all countries have a higher level of human development today than in 1970 The exceptions are the Democratic Republic of the Congo, Zambia and Zimbabwe From 1970 to 2010 real per capita income in developed countries increased 2.3 per cent a year on average, compared with 1.5 per cent for developing countries Life expectancy at birth has increased due to lower infant and child mortality, fewer deaths due to HIV/AIDS and also better nutrition

Limitations of the HDI

Any measure of economic development is bound to have its limitations and criticisms. For the HDI the following points are commonly made:

The standard HDI measure does not take into account qualitative factors, such as cultural identity and political freedoms (human security, gender opportunities and human rights for example)

• The GDP per capita figure – and consequently the HDI figure – takes no account of income distribution.
• If income is unevenly distributed, GNI per capita will be an inaccurate measure of people’s monetary well-being
• Purchasing power parity (PPP) values used to adjust GDP data change quickly and can be inaccurate or misleading

What does this indicator tell us?

The HDI is a summary measure of human development.

How is it defined?

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. It is a measure of a country's average achievements in three dimensions of human development:

• a long and healthy life, as measured by life expectancy at birth;
• knowledge, as measured by mean years of schooling and expected years of schooling; and
• a decent standard of living, as measured by GNI per capita in PPP terms in US$.

The HDI sets a minimum and a maximum for each dimension, called "goalposts", then shows where each country stands in relation to these goalposts. This is expressed as a value between 0 and 1. The higher a country's human development, the higher its HDI value.

What are the consequences and implications?

The HDI is used to capture the attention of policy-makers, the media and nongovernmental organizations, and to change the focus from the usual economic statistics to human outcomes. It was created to re-emphasize that people and their capabilities should be the ultimate criteria for assessing the development of a country, not economic growth.

The HDI is also used to question national policy choices and to determine how two countries with the same level of income per person can have widely different human development outcomes. For example, two countries may have similar incomes per person, but have drastically differing life expectancy and literacy levels, such that one of the countries has a much higher HDI than the other. These contrasts stimulate debate on government policies concerning health and education to determine why what can be achieved in one country is beyond the reach of the other.

The HDI is also used to highlight differences within countries, between provinces or states, and across genders, ethnicities and other socioeconomic groupings. Highlighting internal disparities along these lines has raised the national debate in many countries.

Source of data

United Nations Development Programme (UNDP). Human development data (http://hdr.undp.org/en/data/). 

Further reading

Klugman J, Rodríguez F, Choi HJ. The HDI 2010: new controversies, old critiques. Human Development Research Paper 2011/01. New York: United Nations Development Programme; 2011 (http://hdr.undp.org/en/content/hdi-2010-new-controversies-old-critiques).

Internet resources

UNDP. Human development index (http://hdr.undp.org/en/statistics/hdi/).

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