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RBI GRADE B

HUMAN DEVELOPMENT
ECONOMICS & SOCIAL ISSUES NOTES

FOR RBI GRADE B EXAM

Human Development Free RBI Grade B e-book

Human Development
Economics & Social Issues Notes

Introduction
• Development experience of many fast-growing developing countries revealed that
their high GNP growth rates failed to reduce the socio-economic deprivation of
substantial sections of their population.

• Even developed industrial nations realized that high income is no protection against
the rapid spread of such problems as drugs, alcoholism, AIDS, homelessness, violence,
and the breakdown of family relations.

• At the same time, some low-income countries demonstrated that it is possible to

achieve high levels of human development if they skilfully use the available means to
expand basic human capabilities.

• This establishes the fact that the expansion of output and wealth is only a means to
development.

• The end of development is the welfare of human beings. Therefore, the central focus
of development analysis and planning must be directed towards people’s needs and
oriented towards achievement of this ultimate end.

• As a first step towards achievement of this end there is a need to create a database
on improved social statistics and new development measures.

• To cater to this, need the concept of human development and its measurement
through a measure called Human Development Index (HDI) was introduced by UNDP
(1990) in its first Human Development Report.

What is Human Development?

• United Nations Development Programme (UNDP) describes human development as
“the process of widening people’s choices and the level of well-being they achieve at
the core of the notion of human development.

• In principle, these choices can be infinite and can change over time.

• But, at all levels of development, the three essential choices are for people to lead a
healthy and long life, to acquire knowledge and to have access to the resources
needed for a decent standard of living.
Human Development Free RBI Grade B e-book

Human development approach is about expanding the richness of human life, rather than
simply the richness of the economy in which human beings live. Human development
approach focusses on –
1. People: The human development approach focuses on improving the lives people lead
rather than assuming that economic growth will lead, automatically, to greater
opportunities for all. Income growth is an important means to development, rather
than an end in itself.
2. Opportunities: Human development is about giving people more freedom and
opportunities to live lives they value. In effect this means developing people’s abilities
and giving them a chance to use them.
3. Choices: Human development is, fundamentally, about more choice. It is about
providing people with opportunities, not insisting that they make use of them.

Why Human Development?

According to Paul Streeten, human development is necessary on account of the following
reasons –

• Human development is the end while economic growth is only a means to this end.

• Human development is a means to higher productivity.

• It helps in lowering the family size by slowing human reproduction.

• Human development is good for physical environment.

• Human development and reduced poverty contribute to a healthy civil society,

increased democracy, and greater social stability.

Dimensions of Human Development

Human Development Free RBI Grade B e-book

Essentials Component of Human Development

The noted Pakistani economist Mahbub ul Haq considered four essential pillars of human
development. These are –
1. Equity
2. Sustainability
3. Productivity
4. Empowerment

1. Equity: If development is to enlarge people’s choices, people must enjoy equitable

access to opportunities.
2. Sustainability: Another important facet of human development is that development
should ‘keep going’, should ‘last long’. The concept of sustainable development
focusses on the need to maintain the long-term protective capacity of the biosphere.
This then suggests that growth cannot go on indefinitely; there are, of course, ‘limits
to growth’.
3. Productivity: Another component of human development is productivity which
requires investment in people. This is commonly called investment in human capital.
Investment in human capital—in addition to physical capital—can add more
productivity.
4. Empowerment: Human development paradigm envisages full empowerment of the
people. Empowerment means that people are in a position to exercise choices of their
own free will.

Human Development Report (HDR)

• The Human Development Report (HDR) is an annual report published by the Human
Development Report Office of the United Nations Development Programme (UNDP).

• The first HDR was launched in 1990 by the Pakistani economist Mahbub ul Haq and
Indian Nobel laureate Amartya Sen.

• Since then, reports have been released most years and have explored different
themes through the human development approach, which places people at the center
of the development process.

• The Human Development Reports have an extensive influence on the development

debate worldwide.

• They have also inspired national and regional analyses which, by their nature, usually
address issues that are more country – or regionally - specific.
Human Development Free RBI Grade B e-book

• The title of Human Development Report (HDR) 2019 is “Beyond income, beyond
averages, beyond today: inequalities in human development in the 21st Century”.

Human Development Index (HDI)

• The Human Development Index (HDI) is a statistical tool used to measure a country's
overall achievement in its social and economic dimensions.

• The social and economic dimensions of a country are based on the health of people,
their level of education attainment and their standard of living.

• Pakistani economist Mahbub ul Haq created HDI in 1990 which was further used to
measure the country's development by the United Nations Development Program
(UNDP).

• HDI measures the average achievement in three basic dimensions of human

development:

• A long and healthy life is measured by life expectancy at birth.

• Knowledge as measured by the adult literacy rate (with two-third weight) and
the combined primary, secondary and tertiary gross enrolment ratio (with one
third weight).

• A decent standard of living as measures by GDP per capita (PPP US$).

Before calculating HDI, an index for each of the three dimensions is created. For this
purpose, maximum and minimum values are chosen for each indicator.

Indicators of HDI
Calculation of the index combines four major indicators:
1. Life expectancy for health.
2. Expected years of schooling.
3. Mean years of schooling for education.
Human Development Free RBI Grade B e-book
Human Development Free RBI Grade B e-book

HDR 2010 introduced three new measures – Inequality-adjusted Human Development Index,
Gender Inequality Index and Multidimensional Poverty Index.

Inequality-Adjusted HDI
• The inequality adjusted HDI looks beyond the average achievement of health,
education, and income, to show how these are distributed among its residents.

• Thus, the IHDI is distribution-sensitive average level of human development.

• For example, if the top 10% of the population controlled 90% of the country’s
wealth/income, there would be a high level of inequality.

• Two countries with different distributions of achievements can have the same average
HDI value.

• Under perfect equality the IHDI is equal to the HDI but falls below the HDI when
inequality rises.

Gender Inequality Index (GII)

• Human Development Report (HDR) 2010 introduced a new measure Gender
Inequality Index (GII).

• As per United Nations Development Programme, this index is a composite evaluation

which captures the loss of accomplishment, within a nation, due to gender inequality.

• The new index was introduced as an experimental measure to remedy the

shortcomings of the previous indicators, the Gender Development Index (GDI) and
the Gender Empowerment Measure (GEM), both of which were introduced in the
1995 Human Development Report.
Human Development Free RBI Grade B e-book

Dimensions of GII
Dimensions of GII: It includes three critical dimensions for women –
1. Reproductive health
2. Empowerment
3. Labour market participation

Indicators of GII

• The dimensions of reproductive health have two indicators – maternal mortality ratio
and adolescent birth ratio.

• The dimensions of empowerment have two indicators – female and male population
at least secondary education, and female and male shares of parliamentary seats.

• The dimensions of labour market participation have one indicator – female and male
labour force participation rate.

Gender Related Development Index (GDI) & Gender Empowerment Measure

(GEM)
• The dimensions of reproductive health have two indicators – maternal mortality ratio
and adolescent birth ratio.

• The dimensions of empowerment have two indicators – female and male population
at least secondary education, and female and male shares of parliamentary seats.

• The dimensions of labour market participation have one indicator – female and male
labour force participation rate.
Human Development Free RBI Grade B e-book

Multidimensional Poverty Index (MPI)

• Like development, poverty is multidimensional – but this is traditionally ignored by
headline money metric measures of poverty.

• The Multidimensional Poverty Index (MPI) identifies multiple deprivations at the

household and individual level in health, education and standard of living.

• It uses micro data from household surveys, and—unlike the Inequality-adjusted

Human Development Index—all the indicators needed to construct the measure must
come from the same survey.

• Each person in a given household is classified as poor or non-poor depending on the

weighted number of deprivations his or her household, and thus, he or she
experiences.

• These data are then aggregated into the national measure of poverty.

• The MPI reflects both the incidence of multidimensional deprivation (a headcount of

those in multidimensional poverty) and its intensity (the average deprivation score
experienced by poor people).

• It can be used to create a comprehensive picture of people living in poverty, and

permits comparisons both across countries, regions, and the world and within
countries by ethnic group, urban or rural location, as well as other key household and
community characteristics.

• The MPI offers a valuable complement to income-based poverty measures.

Human Development Free RBI Grade B e-book

Global Multidimensional Poverty Index 2020 was released by the United Nations
Development Programme (UNDP) and the Oxford Poverty & Human Development Initiative
(OPHI) in July 2020.
The data of the index is based on the study of poverty trends in 75 countries.

Global Scenario
• 1.3 billion people are still living in multidimensional poverty. More than 80% are
deprived in at least five of the ten indicators used to measure health, education and
living standards in the global MPI.

• The burden of multidimensional poverty disproportionately falls on children - half of

multidimensionally poor people are children under age 18.

• 65 out of 75 countries studied significantly reduced their multidimensional poverty

levels between 2000 and 2019.

• About 84.3% of multidimensionally poor people live in Sub-Saharan Africa and South
Asia.

• 67% of multidimensionally poor people are in middle-income countries.

Indian Scenario
• India lifted as many as 270 million people out of multidimensional poverty between
2005-06 and 2015-16.

• Neighbourhood Scenario: In China, 70 million people left multidimensional poverty

between 2010 and 2014, while in Bangladesh, the numbers declined by 19 million
between 2014 and 2019.

• Impact of Covid-19: Covid-19 is having a profound impact on the development

landscape. The study finds that on average, poverty levels will be set back 3 to 10 years
due to Covid-19.
Human Development Free RBI Grade B e-book

• Sustainable Development Goals: The index emphasises on measuring and monitoring

progress under the goals to reach ‘zero poverty by 2030-Goal 1 of the SDGs’.

Lorenz Curve & Ginni Coefficient

• The distribution of Income in an economy is represented by the Lorenz Curve and the
degree of income inequality is measured through the Gini Coefficient.

• One of the five major and common macroeconomic goals of a government is the
equitable (fair) distribution of income.

• The Lorenz Curve (the actual distribution of income curve), a graphical distribution of
wealth developed by Max Lorenzin 1906, shows the proportion of income earned by
any given percentage of the population. The line at the 45º angle shows perfectly
equal income distribution, while the other line shows the actual distribution of
income. The further away from the diagonal, the more unequal the size of the
distribution of income

Gini Coefficient
• The Gini Coefficient, which is derived from the Lorenz Curve, can be used as an
indicator of economic development in a country.

• The Gini Coefficient measures the degree of income equality in a population.

• The Gini Coefficient can vary from 0 (perfect equality) to 1 (perfect inequality).
A Gini Coefficient of zero means that everyone has the same income, while a Coefficient of 1
represents a single individual receiving all the income.
This was all from us for Human Development Notes.
Human Development Free RBI Grade B e-book

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