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Indicators and Indices

Have you ever found yourself answering multiple-choice questions, trying to figure out whether your marriage is a ‘happy’ one or if your tantrum throwing 2-year-old is a ‘problem’ child? At any rate, most of us do want to know if our weight is just right or whether we made the right investment at the last market crash. It is human to ask ourselves, “How are we doing?”

Subjective though the answer may be, such a question is so much easier to answer when posed to an individual. When you do the same for a whole amalgam of individuals – a family, a country or the whole world – the complexity increases manifold. We have to rely on averages, qualify for built-in biases and accept less than perfect methodologies. We talked of our obsession with the rate of growth of the Gross Domestic Product (GDP) in India, in our blog post on Growth and Gharibi, at the cost of a more nuanced assessment of how that GDP is distributed and how the people of India are faring.

Let us look at some of the top line indicators that reflect ‘average’ performance in various arenas. Per Capita Income, for instance, is an average measure of the standard of living or economic development of a country and is even used as an indicator of welfare. At least it is a step ahead of GDP, as an indicator, since it accounts for the population size. To say that India's per capita income, today, is around $1393 doesn’t, by itself, reveal much. Does it tell us how educated or healthy, on average, Indians are or even more complex, how happy they are.

Development isn't about per capita income alone. If we are interested in education then literacy rate is a possible indicator but if we are seeking health and, hence, an indicator to measure it, we may turn to life expectancy. And when it comes to the wellbeing of children, what indicators do we depend on? In our posts earlier, the ‘B’ and ‘E’ pieces particularly, we have made ample use of child related indicators – mortality, weight and height – to make our argument about the poor health and care status of our children and the urgent need to intervene in their lives.

The effort to measure and monitor children’s well-being and the use of child well-being indicators is not new and much of the new activity, today, can be traced back to the 1960s social indicators movement and be accounted for by UNICEF’s State of the World’s Children annual report, which first came out 35 years ago. The United Nation’s Convention on the Rights of the Child, through its ratification, reporting and monitoring mechanism, has also played a major role in increasing interest in the field.

Having acknowledged that some indicators are SMARTer than others, they are only ‘indicative’ of the general, average state of affairs. When we try to unpack the ‘average’ they can become one-dimensional unless considered as part of a larger portfolio of related indicators. No country has stopped measuring its GDP, but many have tried to complement it with better indicators to assess national economic wellbeing.

Switching from a single indicator to a set of indicators means that the indicator values have to be assigned weights and aggregated to obtain an index. The Human Development Index (HDI) is one such example: it is a composite statistic of life expectancy, education, and income per capita indicators, which is used to rank countries into four tiers of human development – Very High, High, Medium and Low. India falls in the Medium group with a ranking of 130 and a score of 0.609. Norway is right on top with a score of 0.944…

In fact the only metric used by India, other than GDP, is the HDI. This is rather limiting given the range of concerns that mar the quality of life here – the depletion of the environment (water, air and natural resources); the inequities of caste, class and gender; the threat to economic and political freedoms.

Coming back to the methodology, we should note that index values are sensitive to indicators chosen and weights assigned. Choice of indicators itself reflects value judgments and this is important when cross-country comparisons are made and data are not objective, but based on subjective responses to questionnaires. Indices of global competitiveness, democracy, governance and happiness are like that. As Bibek Debroy, Economist, Member NITI Aayog, says, “They have some pepper but, also, plenty of pinches of salt.

Dear Readers, please do not forget that indicators and indices are mere tools to measure how we are doing as a country, only the means to an end: to look in the mirror and do something about what we see.

See also:

The Economist Intelligence Unit’s index of democracy:

The State of the World’s Children 2016

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