Question

How do the Human Development Index and GDP growth rates differ in what they indicate about a country? Would you prefer to invest in a country with a high GDP growth rate but lower HDI ranking? Why or why not?

Answer 1

The GDP or gross domestic product measures the value of total goods and services produces within the country. It could be a good indicator of wealth creation in the economy but it does not indicate the socio-economic situation in the country. That is why the UN has developed the HDI or human development index. The HDI takes into account some other factors of citizens such as life expectancy, adult literacy rate and per capita income level.

A higher GDP might be good but a higher HDI value is far more important in the long term. If a country is having higher GDP but lower HDI value then its GDP numbers or growth is not sustainable in the future because human capital is the most important for the development of any country. On the contrary, if any country has lower GDP but higher HDI then that country is going to flourish in the time to come. It would be always preferable to invest in a country with a higher HDI ranking.