Sunday, June 21, 2009

Human Development Index - where the Indian tiger trails

In late eighties, India was in the verge of its self-annihilation. The mirth of license raj fettered India's arms to welcome private sector to do business in India. The government engine was at the peak of its inefficiency. Indian Rupee was inconvertible and high tariffs prevented cheap foreign goods and cutting edge foreign technologies from making inner roads in India. The country suffered from a sluggish growth rate and was unable to manage fiscal expenditures.

All these changed in early nineties, when India jumped the globalization bandwagon, creating a fair ground for Indian and global players to do business in India. As a result, the Indian economy registered a steady growth on par with most of the Asian nations.

With all these facts in mind, India's former President Dr. Abdul Kalam predicted India to become a developed nation in 2020. Not so fast. A country's growth and status is not just measured by the stock exchange values or GDP growth. It is also measured by social factors like life expectancy, infrastructural growth, literacy, gender equality, rich-poor ratio, poverty alleviation etc. While there is no doubt about the GDP growth of India, it's social factor is still abysmal.

One of the statistical factor to measure the growth of a country beyond its GDP in terms of different factors mentioned above, is the Human Development Index (HDI). HDI was developed in 1990, and accepted by the United Nations as the standard mean to measure the growth of a country in terms of several social factors along with per capita GDP. Development economists like Amartya Sen, Mahbub Ul Haq were instrumental in developing this index. The UN publishes the HDI and its yearly growth as a part of its annual human development report.

The HDI growth of India is extremely pathetic compared to other developing countries. The chart above gives a comparison of HDI growth from 1975 to 2005 for the BRIC countries. It can be observed that India is the only country in this group to be below the world average. Although globalization might have increased the per capita of the Indian middle class, it is not an absolute panacea to cure all the worries. The country and the states must ensure that it commits itself to the growth of the society as much as to that of the economy.

The chart above compares the growth of India in terms of GDP per capita and HDI. Obviously the GDP growth is an exponential curve. But the HDI has just moved nearly 1.5 times that of the value in 1975. With the way the HDI is measured, you could not expect an exponential curve, however the growth is not even close to somebody who anticipates to become a superpower. In a different context, the Harvard economist, Edward Glaeser has commented about India, "So why do governments that cannot manage the basics of public hygiene think that they can micro-manage an economy?".

In order to ensure the growth of the society, Indian central government has to publish the HDI growth rate of all states. The good performing states must be rewarded and the bad performing states need to be advised to tune their social reforms. All districts have to publish this figure and the district collector can be rated on this basis. During elections, the election commission along with the human resources ministry can publish this figure for each constituency. Let the voters know what their representative had been doing in the past phase. Unless we take some extremely focused measure, we could not become a superpower by 2020 - not when more than 34% of your country lives with less than $1 per day. After all as the Nobel laureate economist, Gary Becker says, the only purpose of economics is to understand and alleviate poverty.

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