GNH AND HDI

Gross National Happiness Index

• Gross National Happiness is a term coined by His Majesty the
Fourth King of Bhutan, Jigme Singye Wangchuck in the 1970s.
The concept implies that sustainable development should take a
holistic approach towards notions of progress and give equal
importance to non-economic aspects of well-being.
• “How are you?” We ask that question of one another often. But
how are we doing – as a country, a society? To answer that
question, Bhutan uses its Gross National Happiness (GNH) Index.
• In 2015, a total of 91.2% of Bhutanese were narrowly, extensively,
or deeply happy. 43.4% were extensively or deeply happy. The
aim is for all Bhutanese to be extensively or deeply happy.
Bhutan is closer to achieving that aim in 2015 than it was in 2010.
• GNH is a much richer objective than GDP or economic growth. In
GNH, material well-being is important, but it is also important to
enjoy sufficient well-being in things like community, culture,
governance, knowledge and wisdom, health, spirituality and
psychological welfare, a balanced use of time, and harmony with
the environment.
The four pillars of GNH:
The Nine Domains of GNH

Criticism of GNH

• From an economic perspective, critics state that because GNH

depends on a series of Subjective judgments about well-being,
governments may be able to define GNH in a way that suits their
interests
• Other critics say that international comparison of well-being will
be difficult in this model; proponents maintain that each country
can define its own measure of GNH as it chooses and that
comparisons over time between nations will have validity. GDP
provides a convenient, international scale.
 • Research demonstrates that markers of social and individual
well-being are remarkably transcultural: people generally report
greater subjective life satisfaction if they have strong and
frequent social ties, live in healthy ecosystems, experience good
governance, etc. Nevertheless, it remains true that reliance on
national measures of GNH would render international
comparisons of relative well-being more problematic since there
is not and is not likely ever to be a common scale as “portable”
as GDP has been with other countries.

Human Development Index

• 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
educational 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). Calculation of the
index combines four major indicators: life expectancy for health,
expected years of schooling, mean of years of schooling for
education and Gross National Income per capita for the standard
of living.

Why do we require HDI?

• Firstly, GDP method of calculating progress ignores non-income

aspects like education and health thus, for example, Arab
countries have high GDP per-capita, but the progress in health
and education field is limited in those countries which do not get
measured in GDP. Similarly, in countries like Cuba and Sri Lanka
GDP per capita is low, but the quality of life is much better than
 many high GDP per capita countries of the Arab world and Latin
America because of high-quality indicators in social sectors. HDI
will overcome this problem
• Secondly, GDP per capita ignores income inequality or
distribution of wealth in a country for example in countries of
Latin America have high GDP per capita but due to skewed
income distribution, the masses are excluded from growth
process.
• The HDI was created to emphasize that people and their
capabilities should be the ultimate criteria for assessing the
development of a country, not economic growth alone

Method of calculating HDI

• The Human Development Index (HDI) is a summary measure of

average achievement in key dimensions of human development:
a long and healthy life, being knowledgeable and have a decent
standard of living. The HDI is the geometric mean of normalized
indices for each of the three dimensions.
(a)Life Expectancy Index assessment

• The minimum value for life expectancy is fixed at 20 years in the

new calculation. The maximum value for life index is kept at 83.2
years.
• Formula to calculate Life Expectancy Index (LEI) = Life Expectancy
of a country -20/ 83.2-20

(b) Education Index assessment

Education Index (EI) assessment is composite of two indices. They are
1. Mean Years of Schooling Index (MYSI)
2. Expected Years of Schooling Index (EYSI)

• Formula to calculate Mean Years of Schooling Index (MYSI) =

Mean years of schooling – 0/ 13.2 – 0
• Formula to calculate Expected Years of Schooling Index (EYSI) =
Expected Years of Schooling – 0/ 20.6 – 0

(C) Income Index assessment

• To calculate this index, goal posts are set as per observations

during 1980 – 2010 in various countries. Gross National Income
per capita is taken as a measure to calculate new Income Index in
new HDI. Minimum income is set as $163, and maximum income
is set as $108,211.
• Formula to calculate Income Index = Log (Country’s GNIpc) – Log
($163) / Log ($108,211) – Log ($163)

How to calculate Human Development Index as per new method?

Formula to calculate Human Development Index (HDI) = (Life
Expectancy Index X Education Index X Income Index) 1/3
New Human Development Index (HDI) is geometric mean of Life
Expectancy Index (LEI), Education Index (EI) and Income Index (II).
After this calculation total value will be between 0 and 1. As per the
values gained, countries will be placed in the list of the division of
countries. They are divided into very high human development, high
human development, medium high human development and low high
human development countries

Global Trends in HDI

• The Scandinavian countries which include Norway, Sweden,

Denmark etc. are world leaders in HDI since most of them
occupy positions within top 10 in HDI list and Norway always
tops the list. According to 2015 HDI rankings, Norway is top
ranked country. The reasons why these countries are performing
so well In HDI are manifold. These countries have high per capita
income, along with this positive state interference in education
and health along with a well-developed social security system
ensure that these countries maintain their dominance in HDI
ranking.
• Among India’s neighbours, Bhutan and Bangladesh figure in
Medium development category. Pakistan (ranked 146) and Nepal
(145) are in the ‘low development’ category, while Sri Lanka (73)
is in the ‘high development’ category.
• The five countries that made up the bottom of the list were Niger
(0.348), Central African Republic (0.350), Eritrea (0.391), Chad
(0.392) and Burundi (0.400).

Strength of HDI index

• There is widespread use of HDI to compare development levels,

and it does reveal clear global patterns.
• Does not solely concentrate on economic Growth, and takes into
consideration that there are other, more social, ways to measure
progress.
 • Increase in education and health shows an improvement in
countries progress index.

Weaknesses of HDI index

• The fact that the HDI uses GDP per capita in its calculations
opens many criticisms. Here are some of them.
• GDP per capita does not give an indication of the income
distribution. Issues about Rich and poor divide etc
• GDP does not show how the income is spent by the government.
Some countries spend more on military than on health care
• The range of variables included by the HDI is too narrow and
does not include much-needed factors such as the % of people
living on under 1$ a day
• Out of the three main constituents of the HDI, some factors are
more important than others. The HDI is flawed for this reason as
the score of the three is averaged out.
• When knowledge is measured it only takes into account what
children learn at school not in the family. And so maybe
knowledge statistics may be distorted if the family play more of a
role in education in the home.
• Longevity can also be distorted as the life expectancy of a person
does not consider how healthy the life was led. i.e. A person
aged 90 years old but has suffered serious illness in the last 30
years of their life would have a higher HDI value compared to a
70-year-old who has led a very healthy life.
• Countries like are countries with booming economic growth. And
also, it has well-developed health and education sector. There is
no religious freedom, there’s censorship on the internet, and the
state is everywhere.
• Data from some developing countries may not be very reliable
and may be difficult to confirm.
• The measures chosen may seem very arbitrary to some because
there are another way of measuring relative qualities in health
and education
• No indication in the education index about access to education
for all groups in society.