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Welfare Indicators
Saturday, April 14 2012, 2:16 PM
Evolution of the Concept
1. Development a synonym for economic growth: Todaro called economic development as a sustained
annual GDP growth rate of 5 - 7%. Till 1960s economic development was a synonym for economic
growth.
2. Growth with redistribution of 60s: During the 60s many LDCs realized that despite realizing their
economic growth targets there was no appreciable decline in poverty and the standard of life of the
masses. Thus they began to call for redistribution with growth. It called for increased social programmes.
3. Crisis of 80s and early 90s: GDP growth rates for most of these countries slowed down / turned negative
and the governments were forced to cut down on social programmes.
4. Human development approach: This puts the purpose of development as enlarging people's choices.
Growth is only a means of capability expansion and not an end in itself.
5. Sustainable development approach: It addresses both intra generational as well as inter generational
equity. It gives high priority to poverty reduction, productive employment, social integration and
environmental regeneration. Raising per capita income is just one part of sustainable development. It has
other more specific goals as well like bettering their health and educational opportunities, giving a clean
environment etc.
Seer's Concept of Development
1. What is happening to poverty?
2. What is happening to unemployment?
3. What is happening to inequality?
World Bank's Concept of Development
1. During the 80s, WB championed economic growth as the goal of development. But in the 1991 report it
admitted that growth was not an end in itself and the challenge was to increase the quality of life of people.
Goulet's Core Values of Development
1. Sustenance: These include the life sustaining basic human needs i.e. food, shelter, health and protection.
An absence of any one of these is called the condition of absolute under development.
2. Self esteem: It is another very important component of improved life - not to be used as a tool by others
for their own end. It is increasingly being linked to wealth in developed countries due to importance
attached to material needs.
3. Freedom: To be able to chose. The advantage of growth is not because wealth increases happiness, but
because it increases the range of choices.
Sen and Dreze on Freedom and Capabilities
1. One way of seeing development is in terms of the expansion of real freedoms that the citizens enjoy i.e. an
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expansion of human capability.

2. Capability refers to the alternative combinations of functionings from which a person can chose. Even
relative poverty can lead to curtailment of absolute capabilities.
Progresses in Human Development / MDG
1.
2.
3.
4.

Poverty: World population living below $1 per day has fallen from 29% in 1990 to 18% in 2004.
Infant mortality: It has fallen from 106 in 1990 to 83 in 2004.
Life expectancy: It has increased by 3 years in the same period.
Education: Primary school completion rate has gone up from 83% in 1999 to 88% in 2005.

Failures in Human Development / MDG

1. Poverty: Much of the progress has happened in China and SE Asian countries. India and Africa are still
lagging. MDG targets are set to be missed. There are still 1 bio people living below $1 per day.
2. Climate change: It will only accentuate the difference between 'haves' and 'have nots' because it hits the
poorest hardest. There will be climate refugees.
3. Nutrition: 28% of children are suffering from malnourishment. The ratio is 42% in India. Both S Asia and
sub Saharan Africa are set to miss the targets.
4. Infant mortality: Only 32 out of ~150 countries have met the MDG targets. Rest including S Asia and sub
Saharan Africa are well set to miss it.
Sustainable Development - Todaro's Basic Issues
1. Environmental accounting: An account must be maintained of the damage we are causing to the
environment or the degradation we are causing by using up natural resources. It calls for Green GDP
approach.
2. Population: Growing population leads to increased pressure on environment.
3. Poverty: Leads to environmental degradation.
4. Growth: Leads to environmental degradation.
5. Rural development: Most of the people live in villages.
6. Urban development: Growing at fast rate. Can't sustain this.
7. Climate change: It will disturb the development. Carbon budget is the amount of gases which can be
emitted without causing dangerous (rise in temperature beyond 2 C) climate change.
How does climate change affect sustainable development?
1. It reduces agricultural productivity. By 2080 additional 600 mm people will be facing acute malnutrition.
2. It heightens water insecurity. By 2080 ~ 2 bio people will be facing water scarcity.
3. It increases exposure to natural disasters as it increases the intensity and irregularity of floods and
droughts. Poor and developing countries are the most affected.
4. It leads to collapse of ecosystems as is the example of fishes disappearing and coral bleaching.
5. It increases health risks as new diseases and microbes spread to new areas.
Amartya Sen and Dreze on Development vs Environment
1. Traditionally economic development has been seen as anti - environment and vice versa. But Amartya Sen
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and Dreze don't think there is any conflict between the two. Their concept of economic development is
one which expands real freedoms which people enjoy i.e. creates capabilities. Integrity of environment is
an essential part of capabilities and by plundering environment for growth we will be restricting this
capability.
How environment degradation affects growth?
1. It compromises or undoes many growth projects. For example loss of village commons for expansion of
agriculture leads to increased problems for dairying and water and fuel, dam silting.
2. It leads to worsening of health. What use is the growth if health is sacrificed and additional income is spent
on health.
3. It has serious distributive issues since typically rich pollute and its the poor who have to bear the
consequences.
4. It also has gender inequality aspect since females have to bear more.
Inclusive Wealth Index

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1. It was developed on the notion that current economic production indicators such as GDP and HDI are
insufficient, as they fail to reflect the state of natural resources or ecological conditions, and focus
exclusively on the short term, without indicating whether national policies are sustainable. This index
measures the wealth of nations by looking into a countrys capital assets, including manufactured, human
and natural capital.
Human Development Index
Index Construction
(a) Sub Indices
1. Health dimension: Life expectancy @ birth [25, 85].
2. Education dimension: 2/3 * (mean schooling years in adult population) + 1/3 * (Expected years of
schooling for school age children). Earlier the criteria used to be adult literacy rate and gross enrollment
ratio.
3. Standard of living dimension: Per capita income @ PPP [100, 40000].
(b) Constraints
1. HDI should reflect how far a country has gone in achieving certain measurable targets. So the maximum
and minimum have been defined for each variable.
2. Life expectancy [20, 85].
(c) Result Evaluation
1. HDI 0.800 indicates high human development.
2. 0.799 HDI 0.500 indicates medium human development.
3. HDI < 0.500 indicates low human development.
Criteria Considered in HDI Construction
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1.
2.
3.
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It should reflect human capabilities.

It should include only a limited number of variables to keep it simple and manageable.
It should be one single composite index instead of multiple indices.
It should cover both social and economic aspects.
It should be kept flexible.

HDI vs PQLI
1. PQLI captures only social well being. HDI captures both economic and social well being.
Empirical Studies on the Neoclassical Convergence
1. Baumol (1986) while studying beta convergence (per capita income growing faster in poor countries than
in rich countries) showed that there is a strong beta convergence among industrial countries and those at
the intermediate levels but there is no evidence of convergence as far as poorer countries are concerned.
Similarly Zind (1991) couldn't find any general evidence of beta convergence but only when initial per
capita incomes were > a threshold.
2. Dowrick (1992) shows that while there is some evidence that the growth rates have been negatively
related to the initial productivity levels when controlled for other factors. However, the movement in other
factors has caused the per capita incomes to actually diverge.
India Human Development Report, 2011
Index
1. In 2001, PC came up with states' HDI which is similar in construction to the UNDP HDI and ranked
them.
2. Per capita expenditure adjusted for .
3. Life expectancy @ birth.
4. Weighted averages of literacy rate for groups in 7 years and above + mean schooling years adjusted for
out of schooling children.
Trends
1. between states is decreasing. Gini coefficient between states has fallen from .33 in 2000 to .23 in 2010.
2. On almost all welfare indicators, SCs, STs, Muslims are converging with the national average.
Q. Why has accelerated growth in India not translated into faster poverty reduction?
1. Spatial concentration: Growth centers have been urban centers in coastal states like Gujarat and
Maharashtra whereas extreme poverty has been concentrated in the rural areas of BIMARU states.
2. Sectoral concentration: Growth has been concentrated in services and manufacturing whereas agriculture
has grown only @ 2.5% in 9th and 10th FYP and 3% in 11th FYP.
3. Jobless growth: In 1980s, 1% increase in GDP was creating ~3x jobs as it is creating now.
State Wise Snapshot of Development (2006)
1. National level: Life expectancy @ birth: 63.2, infant mortality: 57, birth rate: 23.5.
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BIMARU States
1.
2.
3.
4.

Bihar: Life expectancy @ birth: 61.4, infant mortality: 60, birth rate: 30.
MP: Life expectancy @ birth: 57.7, infant mortality: 74, birth rate: 29.
Rajasthan: Life expectancy @ birth: 61.7, infant mortality: 67, birth rate: 28.
UP: Life expectancy @ birth: 59.8, infant mortality: 71, birth rate: 30.

Developed States
1.
2.
3.
4.

Gujarat: Life expectancy @ birth: 63.9, infant mortality: 53, birth rate: 23.
Maharashtra: Life expectancy @ birth: 67, infant mortality: 35, birth rate: 18.
TN: Life expectancy @ birth: 66, infant mortality: 37, birth rate: 16.
Kerala: Life expectancy @ birth: 73.9, infant mortality: 15, birth rate: 15.

Q. What is HDI? Give its limitations as a measure of economic development and suggest improvements. (2009,
I, 20)
Q. Explain sustainable development. (2007, I, 20)
Q. What are the human development indices used for international comparison of status of development?
Elaborate the methodology used for developing the HDI. (2007, I, 60)
Q. Distinguish between economic growth and economic development. What desirable changes are necessary for
achieving the objective of economic development? (2006, I, 60)
Physical Quality of Life Index (Morris D. Morris, 1979)
Index Construction
1. Infant mortality rate.
2. Life expectancy @ 1 year.
3. Basic literacy @ age of 15 years.
Gender Inequality Index
1. Reproductive health: As measured by MMR & adolescent fertility rate.
2. Empowerment: Proportion of women receiving secondary education to men receiving secondary
education and % representation in parliament.
3. Labor force participation.
Human Poverty Index
1. Life expectancy.
2. % of illiterate adult population.
3. Water availability + malnutrition.
Q. Compare HDI with HPI as a measure of development. How is the HPI different from Happy Planet Index?
(2011, I, 20)

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Technology Achievement Index (TAI)

1. Creation of technology: (a) Patents per capita, (b) Royalty and licenses received from abroad per capita.
2. Diffusion of old innovations: (a) Tele-density, (b) Electricity consumption per capita.
3. Diffusion of recent innovations: (a) Internet penetration, (b) Share of technology product exports in total
exports.
4. Human skills: (a) Mean years of schooling, (b) Gross enrollment ratio of tertiary students enrolled in
sciences.
India Human Development Report, 2011
Index
1. Per capita expenditure adjusted for .
2. Life expectancy @ birth.
3. Weighted averages of literacy rate for groups in 7 years and above + mean schooling years adjusted for
out of schooling children.
Trends
1. between states is decreasing. Gini coefficient between states has fallen from .33 in 2000 to .23 in 2010.
2. On almost all welfare indicators, SCs, STs, Muslims are converging with the national average.
Basic Needs Approach
1. Basic needs concept arises from the need to eliminate mass poverty. However, unlike in 70s it is no longer
a blind income or expenditure based approach today but incorporates other criteria like health, education,
food security etc. It involves - (a) Identifying the core set of basic needs, setting up measurable criteria.
(b) Identifying groups which are lagging in these basic needs. (c) Examining recent trends and fixing
targets. (d) Devising strategies so that the targets can be met in reasonable time and implementing such
strategies. (e) Analyzing the reasons for success / failure of the programme.
WB and Basic Needs Approach
1. In 1970s the WB was forced to abandon its earlier rhetoric of only growth as it was found that growth
strategies usually fail to benefit the poor. Moreover whatever minor impact was felt would have taken a
long time to lift the poor out of poverty. So basic needs have to be satisfied in the meanwhile. It also found
that the incomes and productivity of the poor depend in the first place on the direct provision of health and
education facilities. Moreover certain goods like education, sanitation etc. had strong positive externalities
and thus could only be supplied publicly.
2. It can be seen that viewing basic needs as being in conflict with the growth objective is fallacious as it
ignores the positive externalities. Similarly instead of the conventional view of viewing such transfers as
transfer from investment to consumption, it is actually a transfer from physical capital to human capital
which is more productive than physical capital.
National Minimum Needs Programme
1. Free and compulsory education for children between 6 and 14 years.
2. Ensuring availability of minimum public health services in all areas.
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3.
4.
5.
6.
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Providing safe drinking water to all areas.

Providing all weather roads in all areas with population > 500 in plains and > 250 in other areas.
Improvement of slums.
Providing homes to landless labor.
Universal electrification.
Nutritional assistance.

Kaldor's Growth Laws

1. The first law states that there exists a strong positive correlation between the growth of manufacturing
output and the growth of GDP.
2. The second law states that there exists a strong positive correlation between the growth of manufacturing
output and the growth of productivity in manufacturing. This is also called Verdoon's law.
3. The third law states that there exists a strong positive correlation between the growth of manufacturing
output and the growth of productivity outside of manufacturing.

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