Distinguish between the Human Development Index (HDI) and the Inequality-adjusted Human Development Index (IHDI) with special reference to India. Why is the IHDI considered a better indicator of inclusive growth?

Q.1 Distinguish between the Human Development Index (HDI) and the Inequality-adjusted Human Development Index (IHDI) with special reference to India. Why is the IHDI considered a better indicator of inclusive growth? (10 Marks, 150 Words)

Approach

Begin with mentioning the recently released HDI report(India’s ranking), then move to a structured body highlighting key comparisons and insights. Follow it up with limitations and the significance of IHDI for inclusive growth. Conclude by linking the argument with a broader perspective and suggesting a brief way forward.

India has been ranked 130th out of 193 countries in the 2025 Human Development Report (HDR), titled “A Matter of Choice: People and Possibilities in the Age of AI”, released by the United Nations Development Programme (UNDP).

Dimension	HDI (Human Development Index)	IHDI (Inequality-adjusted Human Development Index)	Key Differences	Examples
Definition	A composite index measuring average achievement in three dimensions: a long and healthy life (life expectancy), knowledge (education), and a decent standard of living (GNI per capita).	Adjusts the HDI for inequalities in the distribution of health, education, and income across the population. It reflects the “actual” level of human development when accounting for disparities.	HDI assumes uniform distribution, masking inequalities. IHDI discounts HDI values based on inequality.	HDI: 0.685 (Rank 120/193) IHDI: 0.475 (30.7% loss due to inequality)
Life Expectancy	Measured by life expectancy at birth, reflecting the average years a newborn is expected to live.	Adjusts life expectancy for inequalities in health outcomes, such as access to healthcare and mortality rates across socio-economic groups.	IHDI reduces the health index based on disparities in healthcare access, quality, and outcomes.	HDI: Life expectancy at birth: 67.2 years. IHDI: Adjusted for inequality, the effective life expectancy is lower due to disparities. Inequality in health contributes to the overall loss.
Education (Knowledge)	Measured by two indicators: 1. Mean years of schooling (average years of education for adults aged 25+). 2. Expected years of schooling (years a child entering school is expected to complete).	Adjusts education metrics for inequalities in access to schooling and educational attainment across regions, genders, and economic groups.	IHDI accounts for disparities, such as rural-urban gaps or gender-based differences in education access, lowering the education index.	HDI: Mean years of schooling: 6.7 years; Expected years of schooling: 11.9 years. IHDI: Adjusted for inequality, reflecting lower access in rural areas and among marginalized groups.
Standard of Living	Measured by Gross National Income (GNI) per capita.	Adjusts GNI per capita for income inequality, using measures like the Gini coefficient, to reflect disparities in wealth distribution.	IHDI penalizes countries with high income inequality, reducing the standard of living index compared to HDI.	HDI: GNI per capita: $6,590. IHDI: Adjusted for income inequality, reflecting India’s high Gini coefficient (around 35.7).
Methodology	Uses a geometric mean of normalized indices for health, education, and income. Normalized values range from 0 to 1 based on fixed minimum and maximum values (e.g., life expectancy: 20–85 years).	Uses the same indicators as HDI but applies an inequality adjustment based on the Atkinson inequality measure, computing a geometric mean of inequality-adjusted indices.	IHDI incorporates a “loss” factor, calculated as the percentage difference between HDI and IHDI, reflecting inequality’s impact.	HDI: Geometric mean of three dimensions. IHDI: Loss due to inequality: 30.7% (UNDP report, 2023)
Limitations	Does not account for inequalities, environmental sustainability, or non-economic factors like freedom or happiness. May overestimate development in unequal societies.	Captures inequality but still excludes non-economic factors like political freedom or environmental impact. Data quality for inequality metrics can be less reliable.	HDI oversimplifies by ignoring distribution; IHDI is more nuanced but limited by data availability and complexity.	HDI: Overstates India’s development by not capturing disparities. IHDI: May underestimate inequality due to data gaps in informal sectors.

IHDI considered a better indicator of inclusive growth:

Captures inequality in development outcomes: The HDI’s average-based approach masks disparities, while the IHDI adjusts for inequalities using the Atkinson inequality measure, showing the “loss” in human development due to unequal distribution.
- E.g.: India’s HDI in 2023 is 0.685 (medium human development, rank 120/193), but its IHDI is 0.475, reflecting a 30.7% loss due to inequality.
Reflects disparities across key dimensions: The IHDI breaks down inequalities in health (life expectancy), education (mean and expected years of schooling), and income (GNI per capita), providing a granular view of where inclusivity falters.
- E.g.: India-Specific Insight: In education, India’s HDI reports mean years of schooling at 6.7 years and expected years at 11.9 years. However, the IHDI adjusts these downward due to disparities, such as lower school attendance among girls in rural areas (e.g., 20% gender gap in secondary education in some northern states) and regional variations (e.g., Kerala’s 96% literacy vs. Bihar’s 70%).
Guides targeted policy interventions: By quantifying the loss in human development due to inequality, the IHDI helps policymakers prioritize equity-focused interventions, ensuring growth benefits marginalized groups.
- E.g.: Ayushman Bharat scheme provides free healthcare to 500 million people, but IHDI data suggests rural and low-income groups still face access barriers.

Aligns with Sustainable Development Goals (SDGs): Inclusive growth is central to the SDGs, particularly SDG 10 (reduced inequalities). The IHDI aligns with this by measuring how inequalities hinder development, offering a more relevant metric for sustainable and equitable progress.

Limitations of IHDI as an indicator:

Data dependency: Requires detailed and reliable disaggregated data, which is often unavailable or inconsistent across regions.
Complexity: More difficult to calculate and interpret than HDI, limiting its accessibility for policymakers and the public.
Narrow dimensions: Focuses only on health, education, and income inequalities, ignoring other forms like environmental justice, social exclusion, or political participation.

As highlighted by Amartya Sen, “Inequality is not just about the distribution of income or wealth; it is about the unequal access to opportunities that enable people to live a fulfilling life.” Therefore, strengthening public education, equitable healthcare, gender empowerment, and social protection can ensure that growth translates into real human development, making IHDI a true measure of inclusive progress.