Rejecting Human Capital Index, India says digital age demands better metric

Soon after India rejected the findings of the World Bank's Human Capital Index (HCI), Indian Economic Affairs Secretary Subhash Chandra Garg said a better metric is needed for the index to measure the status of human capital in the digital age. 

"HCI uses metric of industrial era to measure the status of human capital for digital age and its production system. He (Garg) said that a better metric is needed," a Finance Ministry statement on Saturday quoted Garg, who led the Indian delegation at the IMF summit at Bali. 

Speaking at the International Monetary Fund's Development Committee Lunch Session on Friday, Garg asserted that there is a need to recognise that the digital technological changes taking place are more fundamental than even the invention of the steam engine, which had laid the foundation of the industrial revolution. 

"There is a digital revolution which is transforming the world... (and) Human Capital needs to continuously evolve and develop," he said at the session that focused on World Development Report on the changing nature of work, as per the ministry's statement.

The World Bank's inaugural HCI has placed India at 115 out of 157 countries in terms of the quality of human capital based on five parameters -- child survival, school enrollment, quality of learning, healthy growth and adult survival. 
 

India's HCI score is 0.44, which means a child born in the country today will be only 44 per cent as productive "when she grows up as she could be if she enjoyed complete education and full health". This puts India even lower than most of its neighbours in South Asia (HCI 0.46).

On Friday, India rejected the findings of the index that claims to predict the productivity of the next generation of workers, saying it has major methodological weaknesses and substantial data gaps and hence the country has decided to ignore the HCI.

The HCI, which ranks Singapore, South Korea and Japan in the top three places and African countries occupying the bottom spots, is based on survivability, health and education parameters and does not take into account progress in industry or digital infrastructure.
 

The index is a result of compelling evidence of economic benefits derived from investments in health and education. The bank believes it may be more highly correlated than other kinds of industrial and infrastructure investment that many heads of countries may favour.

While the bank has given due importance to human capital based on under-5 mortality rates, expected years of school, learning-adjusted years of school, adult survival rates and stunting rates, the report seems to have miscalculated the HCI score for India and thus its rank.
 

In one of the tables in the World Bank report titled 'Benchmarks', which gives the breakup of the five components of the HCI based on income group, the averages for two components do not tally and are lower than the lowest value given to any particular income group.

The 'Harmonised Test Scores', which is basically learning-adjusted years of school or actual learning based on international standards, gives an average score of 355 for India but the 'Low Income' category has a score of 363, 'Lower Middle Income' has 391, 'Upper Middle Income' has 428 and 'High Income' category has 506.

Similarly, the component of 'Fraction of Children Under 5 Not Stunted' has an average of 0.621 for India as a whole, but on income basis the range starts from 0.658 for 'Low Income' and gets better with higher income category till 0.935 for 'High Income'.