Global Indices: HDI, GII & Ease of Doing Business

Global Indices: HDI, GII & Ease of Doing Business

Concept Explanation

Here’s something they’ll never tell you in a standard economics textbook: GDP is a measure of a country’s economic output, not its people’s wellbeing. A country can have a high GDP because it has oil, but if that oil wealth goes to a handful of oligarchs while most citizens live in poverty, GDP doesn’t tell you that. This is exactly why the world built composite indices — to capture what GDP misses.

The Human Development Index (HDI) was created by the economist Mahbub ul Haq and first published by UNDP in 1990. It combines three dimensions into a single score between 0 and 1:

• Health: Life expectancy at birth (how long people can expect to live)
• Education: Mean years of schooling for adults + expected years of schooling for children
• Income: Gross National Income (GNI) per capita (using purchasing power parity to make cross-country comparison fair)

India’s HDI for 2023-24 was 0.645, placing it in the “Medium Human Development” category. Its rank was 134th out of 193 countries. For context, the world’s top HDI is Norway at 0.97. China’s HDI is 0.788 (rank 75th). Sri Lanka is at 0.78 (rank 77th). Bangladesh, despite lower GDP per capita than India, has made impressive gains.

Here’s what makes HDI powerful for the exam: it reveals the India development paradox. India’s GNI per capita (PPP) has grown substantially, but its HDI is held back by relatively poor health outcomes (life expectancy of ~68 years vs China’s 77 and Sri Lanka’s 77) and low education completion rates. More critically, India’s Inequality-Adjusted HDI (IHDI) — which subtracts the inequality penalty — is significantly lower than its raw HDI, meaning inequalities in health and education access drag down the overall score.

The Global Innovation Index (GII), published by WIPO (World Intellectual Property Organization), measures innovation ecosystems across 80+ indicators. It has two sub-indices: the Innovation Input Sub-Index (institutions, human capital, infrastructure, market sophistication, business sophistication) and the Innovation Output Sub-Index (knowledge and technology outputs, creative outputs). India ranked 39th globally in GII 2024 — up from 81st in 2015. This is genuinely impressive. What drove it? ICT services exports, R&D spending by top Indian companies, venture capital deals, and a growing startup ecosystem (over 1 lakh startups recognised by DPIIT).

The Ease of Doing Business (EoDB) index, formerly published by the World Bank, ranked India at 63rd in 2019 from 142nd in 2014 — a dramatic improvement that the government prominently publicised. But the World Bank discontinued the EoDB in 2021 after methodological concerns were raised. It was replaced by the Business Ready (B-READY) framework, which India is expected to score well on given its regulatory reform momentum.

The Multidimensional Poverty Index (MPI), developed by OPHI (Oxford Poverty and Human Development Initiative) and published with UNDP, uses the Alkire Foster method. Unlike income poverty, MPI captures deprivation across three equally weighted dimensions: health (nutrition, child mortality), education (years of schooling, school attendance), and standard of living (cooking fuel, sanitation, drinking water, electricity, housing, assets). India’s MPI 2023 found that 23 crore people were lifted out of multidimensional poverty between 2005-06 and 2019-21 — that’s roughly the entire population of all European Union countries combined.

Key Terms & Definitions

Term	Definition
HDI	Human Development Index — composite of health, education, and income; score 0-1, higher is better
IHDI	Inequality-Adjusted HDI — HDI minus the penalty imposed by inequality in each dimension
GII	Global Innovation Index — WIPO’s annual ranking of 130+ countries on innovation inputs and outputs
EoDB / B-READY	Ease of Doing Business (discontinued) → replaced by Business Ready framework by World Bank
MPI	Multidimensional Poverty Index — measures poverty across health, education, and living standards (Alkire Foster method)
Alkire Foster Method	A multidimensional measurement approach that counts deprivation across weighted indicators
PPP	Purchasing Power Parity — adjusts exchange rates so the same basket of goods costs the same in every country
Gini Coefficient	Measure of income inequality; 0 = perfect equality, 1 = perfect inequality

Real-World Example (RBI Context)

When India’s GII rank jumped to 39th in 2024, RBI’s report on “India’s Innovation Landscape” noted that this directly correlated with rising venture capital inflows — ₹1.15 lakh crore in VC funding in 2023. RBI connected this to its own data on startup registrations and unicorn creation (India has 110+ unicorns, 3rd largest globally). For the exam, you should note: higher innovation ranking → better investor confidence → more FDI → strengthens rupee and widens capital markets.

Exam Pattern / How It Appears

• Conceptual: Why is India’s HDI rank lower than its GDP rank? (Answer: inequality, education deficit, health outcomes)
• Comparative: Compare India’s HDI with Sri Lanka, Bangladesh, China on any two dimensions
• Numerical/Formula: Given life expectancy and GNI per capita, calculate the health dimension index using the geometric mean formula (yes, they ask this!)
• Current: What did India’s B-READY score reveal? How many people were lifted out of poverty under the MPI?

Step-by-Step Example

Q: Suppose India’s health dimension score (life expectancy index) is 0.548, education dimension score is 0.493, and income dimension score is 0.645. Using the geometric mean method, calculate India’s approximate HDI. (HDI = cube root of health × education × income)

Answer: HDI = ∛(0.548 × 0.493 × 0.645) Step 1: 0.548 × 0.493 = 0.270 Step 2: 0.270 × 0.645 = 0.174 Step 3: ∛0.174 ≈ 0.558 Note: India’s actual HDI uses slightly different methodology with specific geometric means for each indicator — but this illustrates the principle. India’s actual 2022 HDI was 0.633, which gives you a sense of scale.