Insights into Computing the Human Development Index (HDI)

When we talk about a country’s development, GDP per capita tells only part of the story. Can a nation truly be called “developed” if its people live short lives, lack access to education, or struggle to meet basic needs? That is the central question the Human Development Index (HDI) was designed to answer. Introduced by the United Nations Development Programme (UNDP) in 1990, the HDI shifts the conversation from economic output to human well-being – and the way it is computed reflects that philosophy with precision.

What the HDI actually measures 🔗

The HDI is a composite statistical index that ranks countries by their average achievement across three fundamental dimensions of human development: a long and healthy life, access to knowledge, and a decent standard of living. As the Our World in Data platform explains, these three dimensions are measured using four specific indicators – life expectancy at birth, expected years of schooling, mean years of schooling, and Gross National Income (GNI) per capita.

The index was conceived by Pakistani economist Mahbub ul Haq, with the explicit goal of convincing policymakers and the public that development should be evaluated not only by economic advances, but also by improvements in human well-being. The resulting HDI score falls on a scale from 0 to 1 – the closer a country’s score is to 1, the higher its level of human development.

The three components: why these three? 🔗

Each of the three HDI dimensions captures something that money alone cannot fully represent. Their selection is deliberate and grounded in the idea that human beings need more than income to live fulfilling lives.

1. Longevity – a long and healthy life 🔗

This dimension is measured by life expectancy at birth – the number of years a newborn can be expected to live, assuming current mortality patterns remain constant. According to the UNDP’s technical notes, the minimum goalpost for this indicator is set at 20 years, justified by the historical evidence that no country in the 20th century recorded a life expectancy below that threshold. The maximum is set at 85 years, an aspirational target reflecting advances in medicine and living conditions.

Longevity is included because it serves as a broad proxy for a population’s access to healthcare, nutrition, safe water, and sanitation. A society that cannot keep its people alive cannot claim meaningful development regardless of its income levels.

2. Knowledge – access to education 🔗

The knowledge dimension uses two indicators: the mean years of schooling for adults aged 25 and older, and the expected years of schooling for children currently entering the school system. The goalposts here are 0 and 15 years for mean years of schooling, and 0 and 18 years for expected years of schooling – the latter equivalent to obtaining a master’s degree in most countries.

These two indicators are each converted into a sub-index, and then their arithmetic mean is taken to produce the education dimension index. The rationale for including two education indicators, rather than one, is to capture both the current state of the adult population (stock) and the trajectory of the next generation (flow) – giving a fuller picture of a nation’s investment in knowledge.

3. Decent standard of living – income 🔗

The living standards dimension uses Gross National Income (GNI) per capita, adjusted for purchasing power parity (PPP) in constant US dollar terms. Crucially, the UNDP applies the logarithm of income rather than its raw value. This is because each additional dollar of income provides diminishing returns in terms of expanding human capabilities – an income increase from $500 to $1,000 matters far more for human development than an increase from $50,000 to $50,500.

The minimum value is set at PPP $100, which accounts for unmeasured subsistence production in the poorest economies. The maximum goalpost is PPP $75,000. Income is not treated as an outcome in itself – it is recognised as a means to a decent standard of living, not the end goal.

Step-by-step: how the HDI is computed 🔗

The computation of the HDI follows a clear two-step process as defined in the UNDP’s technical notes.

Step 1 – creating the dimension indices 🔗

Each indicator is first converted into a number between 0 and 1 using this standardisation formula:

Dimension Index = (Actual Value − Minimum Value) ÷ (Maximum Value − Minimum Value)

For income, the logarithm is applied to each of the three values – actual, minimum, and maximum – before the formula is used. For education, the formula is applied separately to each of the two sub-indicators, and their arithmetic mean yields the education index.

Step 2 – aggregating into the HDI 🔗

Once the three dimension indices are ready, the HDI is calculated as their geometric mean:

HDI = (I_Health × I_Education × I_Income)^1/3

The use of the geometric mean is significant. Unlike a simple arithmetic average – which would allow a very high score in one dimension to compensate for a very low score in another – the geometric mean penalises uneven development. A country that performs extremely well in income but neglects health or education will score lower than a country with more balanced progress across all three areas. This design choice directly reflects the philosophy that human development requires progress on all fronts simultaneously.

A worked example 🔗

Consider a hypothetical country with the following data:

• Life expectancy at birth: 70 years
• Mean years of schooling: 8 years
• Expected years of schooling: 13 years
• GNI per capita (PPP): $10,000

Health index: (70 − 20) ÷ (85 − 20) = 50 ÷ 65 ≈ 0.769

Education index: Mean years sub-index: (8 − 0) ÷ (15 − 0) ≈ 0.533 | Expected years sub-index: (13 − 0) ÷ (18 − 0) ≈ 0.722 | Education Index = (0.533 + 0.722) ÷ 2 ≈ 0.628

Income index: (log 10,000 − log 100) ÷ (log 75,000 − log 100) = (4 − 2) ÷ (4.875 − 2) = 2 ÷ 2.875 ≈ 0.696

HDI = (0.769 × 0.628 × 0.696)^1/3 ≈ (0.336)^1/3 ≈ 0.695

This score would place our hypothetical country at the upper boundary of the medium human development category (0.550-0.699), or just entering the high human development tier – a result that reflects solid but uneven performance across the three dimensions.

HDI classifications and what they mean 🔗

Based on their final HDI scores, the UNDP classifies countries into four tiers: very high human development (0.800 and above), high (0.700-0.799), medium (0.550-0.699), and low (below 0.550). These cut-off points are derived from the quartile distribution of component indicators across all countries.

Countries like Switzerland, Norway, and Iceland consistently occupy the very high tier. At the other end, several nations in sub-Saharan Africa remain in the low category – a reflection of persistent challenges in health systems, education access, and income poverty.

India’s HDI performance in context 🔗

India’s trajectory on the HDI illustrates both the index’s utility and the complexity of development. According to the UNDP’s 2025 Human Development Report, India ranked 130 out of 193 countries, with an HDI value of 0.685 in 2023 – up from 0.676 in 2022. This places India firmly in the medium human development category and draws it closer to the 0.700 threshold for the high tier.

India’s HDI has grown by over 53% since 1990, faster than both the global and South Asian averages. Life expectancy has reached its highest level since the index was first introduced. However, a persistent challenge is inequality – India’s HDI falls by 30.7% when adjusted for inequality in health, education, and income distribution, one of the higher losses in the region. This gap between the headline HDI and the inequality-adjusted figure underscores precisely why the HDI’s three-dimensional structure matters: income growth alone does not guarantee that health and education improvements reach everyone.

Limitations and evolving approaches 🔗

The HDI is widely recognised as a more holistic measure of development than GDP alone, but it is not without shortcomings. It does not capture inequality within countries, environmental sustainability, political freedom, or personal security. To address some of these gaps, the UNDP has developed complementary indices: the Inequality-adjusted HDI (IHDI), the Gender Development Index (GDI), the Gender Inequality Index (GII), and the Multidimensional Poverty Index (MPI). As Our World in Data notes, the IHDI in particular acknowledges that life expectancy, education, and income are not distributed equally within a country, and discounts the average HDI accordingly.

The HDI’s strength, nonetheless, lies in its simplicity and comparability. By reducing the complexity of human development to a single number derived from three clear dimensions, it gives policymakers, researchers, and citizens a common language for tracking progress – and for asking uncomfortable questions about where that progress is, and is not, reaching people.

What do you think? If you were redesigning the HDI for the 21st century, which additional dimension – such as environmental sustainability, digital access, or political freedom – would you consider most essential to include? And does a single composite score truly capture the richness of what it means for a society to be “developed”?

References

1. https://hdr.undp.org/data-center/human-development-index
2. https://ourworldindata.org/human-development-index
3. https://hdr.undp.org/sites/default/files/2021-22_HDR/hdr2021-22_technical_notes.pdf
4. https://hdr.undp.org/sites/default/files/2025_HDR/HDR25_Technical_Notes.pdf
5. https://hdr.undp.org/reports-and-publications/2020-human-development-report/data-readers-guide
6. https://www.undp.org/india/press-releases/indias-human-development-continues-make-progress-ranks-130-out-193-countries