Human Development Index and Multidimensional Poverty Index: A brief overview

Human Development Index:
The Human Development Index is an indicator to define and measure the levels of development of a nation. Every year the UNDP(United Nations Development Programme) releases an HDR (Human Development Report) which ranks the countries as per their HDI. The HDI was developed by Mahbub ul Haq and Amartya Sen, along with other economists in the 1990s.
HDI measures development by combining 3 indicators-

1. Health
2. Education
3. Standard of Living

Health component is measured by life expectancy at birth with a minimum value of 20 years and a maximum value of 83.57 years.

Education component of HDI is measured by two indicators; Mean of years of schooling (for adults aged 25 years) and Expected years of schooling (for children of school entering age).

Standard of living is measured by calculating GNI (Gross National Income) at PPP (Purchasing Power Parity) in US dollars. The HDI is the geometrical mean of the normalised indices which gives a value in the range of 0.0-1.0.

As per their achievements, countries can be broadly classified into 3 categories-

1. High Development Countries with an HDI of 0.8-1.00
2. Medium Development Countries with an HDI of 0.5-0.799
3. Low Development Countries with an HDI of 0.0-0.499

The last HDR released in 2015 by the UNDP which stated the HDI of India to be 0.586 with a life expectancy at birth of 66.4 years. India ranks 135th among 187 countries and is ranked poorly compared to other BRICS nations. The top five ranked countries as per the HDR 2014 are Norway, Australia, Switzerland, Netherlands and the United States. The medium ranked countries include are South Africa, Egypt, Mongolia, Philippines and Indonesia. The bottom five ranked countries are Sierra Leone, Chad, Central African Republic, DR Congo and Niger.

Multidimensional Poverty Index:

The global Multidimensional Poverty Index is an international measure of acute poverty covering over 100 developing countries. It was introduced as a replacement for the Human Poverty Index (HPI). The HPI (1997-2009) used country averages to reflect aggregate  deprivations in health, education and standards of living but failed to identify the deprivations of an individual, a household or a group of people. The MPI overcomes these shortcomings by capturing overlapping deprivations and how many deprivations people face on an average. The MPI can be successfully broken down by indicators to show how multidimensional poverty affects different persons, regions and ethnic groups. It was developed in 2009 by the Oxford Poverty and Human Initiative and the UNDP.

The same three dimensions are used for the calculation of MPI which were used for HDI. Each dimension consists of several indicators. They are-

• Health: Child Mortality and Nutrition.
• Education: Years of Schooling and School Attendance.
• Standards of Living: Cooking Fuel, Toilet, Water, Electricity, Floor, Assets.

These 10 indicators are used to calculate the MPI. The first four indicators are weighted at 1/6 whereas the rest are weighted at 1/18. An individual or household can be classified as MPI poor if they are deprived in 1/3rd or more of the indicators i.e. greater than or equal to 33.33%.

 The formula used for calculation of MPI of a country is, MPI = H . A, where H= Percentage of people who are MPI poor and A = Average Intensity of MPI poverty across the poor.

The MPI has emerged as a powerful tool to identify regions and groups afflicted by severe poverty which can help policy makers to target these groups and support them through various poverty alleviation schemes.

Between 1999 and 2006 India has reduced its MPI by 0.050 units or 16%, from 0.300 to 0.251. This reduction is mainly due to reduction in H, the number of people identified as poor. Reduction in intensity in A was small but still significant. Reduction in India's MPI has been positive at 1.2 % per year but the progress has been less than some of its neighbours, which are significantly poorer in terms of income. Nepal reduced the percentage of poor people from 64.7% to 44.2% from 2006-2011, 4.1 percentage points per year, while Bangladesh's poverty rates decreased by 3.2 points per year.

Human Poverty Index:

Before the MPI was introduced, the HDR also contained the HPI statistics for various countries. Although the HPI was supplanted with the MPI, it was an important measure of poverty for policy makers in developing countries. The first HPI data was released in the year 1997.

HPI concentrates on three essential elements of human life already reflected in HDI: longevity, knowledge and decent standards of living. The HPI was calculated separately for developing countries and high-income OECD (Organisation for Economic Co-operation and Development) countries.

HPI-1 (for developing countries) =  

P1 : Probability at birth of not surviving to age 40 (times 100)
P2 : Adult illiteracy rate
P3 : Unweighted average of population without sustainable access to an improved water source and children under weight for age
a : 3

HPI-2 (for OECD countries) = 

P1 : Probability at birth of not surviving to age 60 (times 100)
P2 : Adults lacking functional literacy skills
P3 : Population below income poverty line (50% of median adjusted household disposable income)
P4 : Rate of long-term unemployment (lasting 12 months or more)
a: 3

(sources: en.wikipedia.org and hdr.undp.org)