Promoting Human Development in India: Costs of Inequality

Policy emphasis in Indian economic development planning has always been on ‘economic growth with income redistribution’. Such a strategy seeks to exploit the potential of development programmes for poverty reduction and welfare gains by reducing the costs due to inequality in income distribution. The state of Kerala provides an empirical example to show how it is possible to achieve both growth and improved income distribution by human development, which is also acknowledged by the Government of India. The three critical dimensions of human development identified by the UNDP are (i) a long and healthy life; (ii) knowledge; and (iii) a decent standard of living as measured by per capita income. There is ample scope for achieving economic growth, human development and poverty reduction by reducing the extent of inequality in all these three dimensions of human development. Therefore, this study seeks to quantify the loss in human development due to inequalities in these three dimensions across states in India. This is done using the methodology to estimate a new index called the Inequality-adjusted Human Development Index (IHDI) proposed by the UNDP in its Human Development Report for 2010 entitled The Real Wealth of Nations: Pathways to Human Development. The HDI is a measure that summarises average levels of achievements in each of the three dimensions in terms of unit-free scores obtained by normalising their respective measures with reference to exogenous limits called goalposts. To facilitate international comparisons, the UNDP specifies the goalposts in the global context. To contextualise the HDI estimates with reference to feasibility defined by the country’s potential, this study has made appropriate revisions to the goalposts with reference to the mainstream states in India. This is done in terms of order-based statistics, since mean-based estimates are misleading when the distributions of variables under review are skewed. * M.H. Suryanarayana, Indira Gandhi Institute of Development Research, Mumbai and Ankush Agrawal, Indian Institute of Technology Delhi, New Delhi. An earlier version of this study has been reported in the Indira Gandhi Institute of Development Research publication titled India Development Report 2012–13, which is based largely on policy studies undertaken at the Institute. The authors thank Tushar Agrawal for generating estimates of average years of schooling and inequality in education, S. Chandrasekhar for estimates of school life expectancy, Jitendra Asati for helping us in getting files for Indian states into shape, K Seeta Prabhu, K.L. Krishna and an anonymous referee of the International Policy Centre for Inclusive Growth for comments and suggestions. Corresponding author’s email address: [email protected]. 2 International Policy Centre for Inclusive Growth This study reveals a substantial loss in human development due to inequality in different dimensions across states in India. Among the three dimensions, the potential lost due to inequalities is highest in education. This conforms with the findings in the global context reported in the UNDP Human Development Report 2010. Similarly, the extent of inequality is staggering in the case of health. Many studies have pointed out marked differences in access to health care and its utilisation. As regards health and education, the results show low levels of attainment characterised by a high level of inequality. Given the pronounced growth that the country has witnessed during the last decade, policies promoting economic growth, education and health need to be integrated with those addressing their respective distributional dimensions. Thus, our results provide useful policy insights for a strategy seeking to promote human development through a distributive policy option— that is, addressing inequalities across dimensions in different states in the country.