Human Development: Concept, HDI and India's Record for RBI Grade B ESI

Last updated: 2026-11-10 · MockMentor

Human development is how the RBI Grade B Phase 2 Economic and Social Issues (ESI) syllabus moves from measuring growth to judging it. Questions on "growth versus development", inclusive growth, health and education spending, or India's rank in global indices all come back to this idea: an economy has developed only when its people can live longer, healthier, better-educated and freer lives.

In one line: human development means widening the choices people have, and the Human Development Index measures it by combining a long and healthy life, knowledge and a decent standard of living.

Basic concepts

• Human development: the process of enlarging people's choices and freedoms, so that they can live the lives they have reason to value.
• Capability: what a person is actually able to do or be, such as being well nourished, reading, working or taking part in community life. The term comes from Amartya Sen.
• Functioning: an achieved state, such as being healthy or employed. Capabilities are the set of functionings open to a person.
• Human capital: the knowledge, skills and health that make a person more productive. It treats people as inputs to growth.
• Human Development Index (HDI): a summary measure, published by the United Nations Development Programme (UNDP), of a country's average achievement in health, education and income.
• Goalposts: the minimum and maximum values the HDI uses to turn each indicator into a score between 0 and 1.
• Purchasing Power Parity (PPP): an exchange rate that equalises what a basket of goods costs in different countries. Income in the HDI is measured in PPP dollars.

Why in News?

1. In the 2025 Human Development Report (HDR), released on 6 May 2025, India's HDI value rose to 0.685 for 2023, and its rank improved from 133 to 130 out of 193 countries. India remains in the medium human development group.
2. UNDP has announced that the 2026 Human Development Report, "Thriving Together: Advancing Human Development on a Shared Path for People and Nature", will be released on 1 December 2026. It will introduce a new Nature Relationship Index alongside the HDI.
3. The Global Multidimensional Poverty Index 2025, released on 21 October 2025, found that India's multidimensional poverty fell from 27.7% in 2015-16 to 16.4% in 2019-21, with about 13.5 crore people moving out of it.

Why GDP alone cannot measure development

A country can grow fast while many of its people remain poorly fed, poorly schooled and in poor health. GDP counts the value of output, not how it is shared or what it does for people's lives. Two countries with the same per capita income can have very different life expectancy and literacy, depending on how much they spend on public health and schooling, and how equally income is distributed. Kerala, for example, has long had social indicators close to those of much richer economies despite a middle-level income, because of early investment in schools, health care and women's education.

This gap between income and wellbeing is the starting point of the human development approach. Mahbub ul Haq, a Pakistani economist who launched the first Human Development Report in 1990 with Amartya Sen, put it simply: the real wealth of a nation is its people.

Meaning of human development

The 1990 report defined human development as "a process of enlarging people's choices". The most important of these choices are to lead a long and healthy life, to be educated and to have access to the resources needed for a decent standard of living. Beyond these come political freedom, human rights, self-respect and the ability to take part in community life.

Two points follow from this definition. First, income is a means, not an end. It matters because of what it allows people to do. Second, people are agents of development as well as its beneficiaries. A policy that gives people food but no voice in decisions that affect them is an incomplete form of development.

Human capital and human development

The two views agree on what to invest in. They differ on why. For policy, the overlap is useful: spending on schools and hospitals raises both growth and wellbeing.

The capability approach

Amartya Sen argued that the right way to judge a person's wellbeing is to look at their capabilities: the real freedoms they have to achieve the things they value. Two people with the same income may have very different capabilities. A person with a disability needs more resources to move around than someone without one. A woman in a household where she cannot decide how money is spent may gain little from a rise in family income. So development has to be judged by how far it expands capabilities, which income and possessions only partly capture.

Sen's later book, "Development as Freedom" (1999), described five kinds of freedom that support each other: political freedoms, economic facilities, social opportunities (schools and health care), transparency guarantees and protective security (safety nets). The absence of these, which he called "unfreedoms", is what development must remove.

Why human development matters

• It improves growth itself. A healthier, better-educated workforce is more productive. East Asian economies such as South Korea invested heavily in schooling and health before their fastest growth, and that investment helped sustain it.
• It reduces poverty more lastingly. Schooling and health break the passing of poverty from one generation to the next.
• It supports democracy and social stability. Educated citizens take part in public life and hold governments to account.
• It makes growth inclusive. When people have capabilities, they can take the opportunities growth creates, instead of being left behind.
• It reflects what people value. Surveys across countries show people care about health, family, security and dignity, not income alone.

Pillars of human development

Dimensions of human development

Education

Education is both a capability and a means to other capabilities. A literate person can read a medicine label, check a bank statement, take part in elections and move to better jobs. Women's education has particularly strong effects: it is linked with lower child mortality, later marriage, smaller families and better nutrition of children.

India has achieved near-universal enrolment in primary school. Its challenges now are learning quality (many children in upper primary classes cannot read a simple text or do basic division), dropouts at the secondary level, and the gap between what schools teach and what jobs need. The National Education Policy 2020 aims at foundational literacy and numeracy by Class 3, a new 5+3+3+4 school structure, mother-tongue teaching in the early years and a gross enrolment ratio of 50% in higher education by 2035.

Health

Health is the most basic capability: without it, no other choice can be exercised. India's life expectancy has risen from about 59 years in 1990 to 72 years in 2023. Infant and maternal mortality have fallen sharply, and institutional deliveries have become the norm. But child stunting, anaemia among women, the rise of non-communicable diseases such as diabetes and heart disease, and high out-of-pocket spending on treatment remain serious problems. Public spending on health has stayed low by international standards, at about 2% of GDP for the Centre and states together.

Gender

Human development cannot be achieved if half the population is held back. Gaps between women and men in education, health, earnings and political voice reduce the capabilities of women directly, and the development of societies indirectly. India's low female labour force participation, the skewed sex ratio at birth in some states, and the small share of women in Parliament and on company boards all show up in its gender indices.

Standard of living

A decent income allows people to buy food, housing, clothing and transport. In the HDI it is measured by Gross National Income (GNI) per capita in PPP terms, and its value is reduced by taking the logarithm, because each extra rupee matters less at higher incomes than at lower ones.

The Human Development Report and its indices

The Human Development Report has been published by UNDP since 1990. Besides the HDI, it now includes a family of indices.

Human Development Index (HDI)

Each indicator is turned into an index between 0 and 1 using the goalposts. The education index is the average of the two schooling indices. Since 2010, the HDI has been the geometric mean of the three dimension indices. A geometric mean means that a very poor score in one dimension cannot be fully made up by a high score in another.

Countries are grouped by HDI value: very high (0.800 and above), high (0.700 to 0.799), medium (0.550 to 0.699) and low (below 0.550).

India in the 2025 report

Iceland topped the 2025 index with an HDI value of 0.972. India's HDI value has risen by more than half since 1990, one of the fastest improvements among large countries. The weakest of its three dimensions is mean years of schooling, which reflects the low education of older adults, especially women.

Limitations of the HDI

• It captures only three dimensions and leaves out freedom, security, environment, and the quality of work.
• National averages hide inequality between groups and regions.
• It measures the quantity of schooling, not what students actually learn.
• Life expectancy says nothing about years lived in good health.
• The weights and goalposts are set by judgement, and the use of income in logarithm reduces the weight of income gains.
• Data for many countries comes with a lag of one to two years.

Inequality-adjusted HDI (IHDI)

The IHDI discounts each dimension of the HDI by the inequality in its distribution. If everyone in a country had the same health, education and income, the IHDI would equal the HDI. The gap between the two is the loss due to inequality. India loses 30.7%, one of the highest losses in South Asia, mostly because of inequality in education and income.

Gender Development Index (GDI)

The GDI is the ratio of the HDI calculated separately for women and men. A value of 1 means equal achievement. India's value of 0.874 puts it in the group of countries with the largest gaps, mainly because women's income and years of schooling are much lower than men's.

Gender Inequality Index (GII)

The GII measures disadvantage faced by women in three areas: reproductive health (maternal mortality ratio and adolescent birth rate), empowerment (share of seats in Parliament and share of adults with at least some secondary education) and the labour market (labour force participation). A higher value means more inequality. India's rank improved to 102 in the 2025 report.

Multidimensional Poverty Index (MPI)

The global MPI, developed by UNDP and the Oxford Poverty and Human Development Initiative (OPHI) in 2010, replaced the earlier Human Poverty Index. It uses ten indicators across health (nutrition, child mortality), education (years of schooling, school attendance) and living standards (cooking fuel, sanitation, drinking water, electricity, housing, assets). A person deprived in a third or more of the weighted indicators is multidimensionally poor. India's own national MPI, built by NITI Aayog, adds maternal health and bank accounts. Both are covered in detail on our page on poverty in India.

Planetary pressures-adjusted HDI (PHDI)

Introduced in 2020, the PHDI adjusts the HDI for a country's carbon dioxide emissions and material footprint per person. Rich countries with high emissions fall sharply when this adjustment is made, which makes the point that high human development has so far come at a high environmental cost.

Human development in India

Where India has done well

• Life expectancy has risen by about 13 years since 1990.
• Primary school enrolment is close to universal, and the gender gap in enrolment has almost closed.
• Basic services such as electricity, sanitation, bank accounts and cooking gas now reach most households, which is why multidimensional poverty has fallen so fast.
• Infant mortality and maternal mortality have dropped sharply.
• States such as Kerala, Goa, Himachal Pradesh and Tamil Nadu have human development levels well above the national average.

Why India still ranks low

1. Low public spending on health and education. Together they have long stayed below what most countries at similar income levels spend, leaving families to pay for private schools and hospitals.
2. Learning outcomes. Children spend years in school but learn far less than their grade requires, which keeps the productivity gains of schooling low.
3. Malnutrition. Child stunting and anaemia remain high and damage health and learning for life.
4. Gender gaps. Women's low labour force participation and earnings drag down both the GDI and the income dimension.
5. Regional inequality. Large states in the north and east lag far behind the south and west, and pull the national average down.
6. Informal work. Most workers have no social security, so illness or job loss quickly reverses gains.
7. Social exclusion. Caste, tribe and religion still shape access to schooling, health care and jobs in many places.

Policies that shape human development

Gross National Happiness and other alternatives

Bhutan's fourth king, Jigme Singye Wangchuck, said in the 1970s that Gross National Happiness was more important than Gross National Product. Bhutan's GNH Index now covers nine domains: psychological wellbeing, health, education, time use, cultural diversity, good governance, community vitality, ecological diversity and living standards. In 2011, the UN General Assembly adopted a resolution inviting countries to pursue happiness and wellbeing as a development goal, and the World Happiness Report has been published since 2012.

Other alternatives to GDP include the Genuine Progress Indicator, which subtracts the costs of crime, pollution and inequality from consumption, and the OECD's Better Life Index, which lets users weight eleven areas of wellbeing themselves.

Growth and human development: which comes first?

One view, associated with the "East Asian model", holds that rapid growth generates the resources to fund schools and hospitals, so growth should come first. The other view, supported by Sen and by the experience of Kerala and Sri Lanka, holds that public investment in health and education can raise human development even at low incomes, and that this then lays the base for faster growth.

The evidence suggests the two reinforce each other. Growth without human development tends to be unequal and to slow down when the workforce cannot move into skilled jobs. Human development without growth is hard to finance for long. India's challenge is to use its fast growth to fund much stronger public investment in learning, nutrition and health, so that the next generation of workers can earn more than the last.

Way forward

• Raise public spending on health towards the National Health Policy 2017 target of 2.5% of GDP, and on education towards 6%, as the National Education Policy recommends.
• Shift the focus of schools from enrolment to learning, with regular assessment of foundational skills.
• Tackle malnutrition through better maternal care, diverse diets and clean water and sanitation.
• Bring more women into paid work through childcare, safe transport and flexible jobs.
• Target the lagging states and districts, as the Aspirational Districts Programme does, using data to track progress.
• Make growth job-rich, so that income gains reach the bottom half and support further spending on health and education.

Possible exam and interview questions

1. "Human development is the process of enlarging people's choices." Explain the concept and discuss how it differs from the human capital approach. (420 words)
2. India's HDI rank remains low despite high economic growth. Analyse the reasons and suggest measures to improve India's human development. (620 words)
3. Explain the construction of the Human Development Index and its main limitations.
4. What do the IHDI and the GDI reveal about human development in India that the HDI does not?
5. Interview: Should India give more importance to its GDP growth rate or its HDI rank?

Related reading: national income and per capita income, poverty in India, and our descriptive writing guide.

More in ESI

• National Income
• Poverty
• Employment
• Sustainable Development
• Economic History and Planning

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