INDICATORS OF GROWTH AND DEVELOPMENT — Economics STD 12 Commerce — Question
Gujarat BoardEnglish MediumSTD 12 CommerceEconomicsINDICATORS OF GROWTH AND DEVELOPMENT5 Marks
Question
Compare $\text{PQLI}$ and $\text{HDI}$ and show which indicator is superior? Why?
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Answer
$\text{PQLI}$ was developed to overcome the various limitations of the previous scales.
It was decided to develop an index which would consist of composite indicators to measure development in terms of meeting the basic needs of the majority of the population of a country or in terms of ‘quality of life’. This led to the development of a new index called Physical Quality of Life Index.
Morris D. Morris developed a single composite index using three indicators life expectancy at age one, infant mortality and literacy.
For each indicator, the performance of a country is rated on a scale of $1$ to $100,$ where $1$ represents the ‘worst’ performance and $100$ the ‘best’ performance.
Once a country’s performance in life expectancy, infant mortality and literacy has been rated on a scale of $1 $ to $100,$ the composite index of Physical
Quality of Life Index $\text{(PQLI)}$ for the country is calculated by averaging the three ratings, giving equal weightage to each.
Limitation of $\text{PQLI}$ and development of $\text{HDI:}$
$1.$ A major criticism of the $\text{PQLI,}$ however, is that it fails to include many other , social and psychological characteristics suggested by the term ‘quality of life’.
$2.$ The index has also been criticized on the grounds that it lacs a proper reasoning in giving equal weightage to all the three indicators and the possibility that measures such as life expectancy and infant mortality reflect practically the same phenomenon.
$3.$ To overcome the limitations of $\text{PQLI}$ and other indicators, the Human Development Index $\text{(HDI)}$ was developed.
$4.$ The $\text{UNDP}$ has defined human development as “a process of enlarging people’s choices”. This depends not only on income but also on other social indicators. In contrast to this $\text{PQLI}$ considered social indicators separately.
$5. $The three basic indicators are: longevity, knowledge, and a decent standard of living. Longevity is measured by life expectancy at birth; knowledge is measured by a combination of the adult literacy rate and standard of living is measured by $\text{GDP}$ per capita $($in purchasing power parity $US\$).$
$6.$ Before the $\text{HDI}$ is computed, an index needs to be created for each dimension, the life expectancy index, education index and income index. Performance in each dimension is expressed as a value between $0$ and $1.$
$7.$ The literacy index and gross enrolment index are given two-third and one-third weightage respectively to arrive at the education index. The $\text{HDI}$ is calculated as a simple average of the three.
$8.$ Countries are then classified into three categories:
High human development $\text{(HDI 0.800}$ and above$),$
Medium human development $\text{(HDI 0.799-0.500)}$ and
Low human development $\text{(HDI below 0.500).}$
$9.$ The beauty of $\text{HDI}$ is that once the increase in income passes the cut-off point, it is faced with diminishing returns and this makes it necessary to let the social indicators determine the $\text{HDI.}$ Thus, the index is tuned to the growing concern among nations, regarding human development.
$10.$ The $\text{HDI,}$ unlike other indices which measure absolute levels, ranks countries in relation to each other. The index takes the progress made from the minimum towards the maximum.
$11.$ The distance travelled is expressed in percentage terms. A clear picture emerges of the wide disparities that exist in the levels of human development between the developing and the developed countries.
$12.$ The same exercise is repeated in respect to the other two components of the index. The distance travelled in each case is then used as the basis for combining the three devices, and this gives a common denominator to rank countries on a uniform scale.
Thus, looking to the overall manner in which $\text{HDI}$ is computed and the indicators that it considers we can rightly say that $\text{HDI}$ is better over $\text{PQLI.}$
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