The quality of life index prepared and published by United Nations Development Programme is termed as Human Development Index.
HDI studies the following three basic human capabilities:
1. Living a Long Life (Longevity)
2. Being Knowledgable (Educational Attainment)
3. Enjoying decent standard of living (Real Per Capita GDP)
In order to calculate HDI we are required to construct the following three indices.
1. Life expectancy index: This index measures the degree of the achievement of the country regarding the expectancy of the people in a country. The value of index varies between 0-1.
2. Educational attainment index: This index measures the level of educational attainment of the people. The value of this index also varies between 0-1. Higher index shows higher level of educational attainment.
3. Real GDP per capita index: Real GDP is calculated at constant price. It shows the changes in physical production in real terms. Per capita, real GDP is GDP apanstant price divided by population. It is better measure of the quality of life of the people as compared to per capita income.
HDI = \(\frac{Life\, Expectancy \,index + Educational \,Attainment \,index + Real \,GDP \,per\, capita \,index}{3}\)
General formula for the construction of individual in dices of the indicator is as under -
Index = \(\frac{Actual\, Value - Minimum \, Value}{Maximum \, Value - Minimum\, Value}\)