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I. Introduction

Since the introduction of neoliberal policies in 1991, India has demonstrated impressive

economic growth. Reduced import tariffs, market deregulation, and lower taxes spurred an

increase in foreign investment and India’s Gross Domestic Product (GDP) soared consequently.

Annual GDP growth hovered around eight percent annually from 2003 to 2016, and from 2013

to 2018 India presented as the world’s fastest-growing economy, surpassing China. While life

expectancy and literacy improved alongside GDP growth, economic development far outpaced

human development, and India continues to perform poorly in terms of its population health,

education, and equality, placing 132 out of 191 countries for its 2022 Human Development Index

(HDI). This paper endeavors to understand why India’s economic growth has not translated into

enhanced HDI, specifically with regard to life expectancy. It further aims to discern how policies

and institutions have failed to connect economic growth with human development and offers

recommendations for policymakers moving forward.

In 2019, 28 percent of the world’s poor lived in India despite it passing the UK, France,

Italy, and Brazil to become the fifth-largest economy by nominal GDP (Mehta 2020). Given the

magnitude and influence of its population and economy, addressing the gap between economic

growth and human development in India is critical. Identifying causes of slow human progress in

India will inform the creation of policies that promote human development alongside economic

growth. The paper unfolds into a brief literature review, followed by an application of economic

theory to the Indian context and a data analysis showing the disconnect between economic

growth and human development. The paper argues that worsening inequality, generated by

neoliberal policies that benefit the wealthy at the expense of the poor, explains the gap between

India’s substantial economic growth and its weak human progress as measured by HDI.
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II. Literature Review

Scholars of development have long debated the relationship between economic growth

and human development. Some scholars have identified a two-way causal relationship between

human and economic development, explaining that economic growth can boost human capital

formation and better health outcomes enhance economic growth by lifting productivity (Gupta

and Mitra 2004; Dholakia 2003). Lange and Vollmer specifically examine the causal effect of

economic development on population health and conclude that economic growth does not

necessarily improve population health; they add that resource distribution matters and as a result

appropriate policies and institutions must be established to ensure that growth benefits all (2017).

While HDI increased 56 percent between 1981 and 2001 and now falls in the “medium

human development range”, India still ranks behind other BRIC countries and its South Asian

neighbors, Sri Lanka and the Maldives (Varatharajan 2006). Studies have brought attention to its

major challenges, notably dramatic state-level variations and “lopsided development” patterns,

characterized by rapid economic growth alongside slow human developmental progress, due to

neoliberal policies (Zaidi and Salam 1998).

Varatharajan highlights differential HDI scores across states, noting values as high as

0.638 in Kerala but as low as 0.367 in Bihar in the same year (2006). Asaria shows differential

outcomes across the rural-urban divide, highlighting that life expectancy in urban areas exceeds

that in rural areas due to the ongoing epidemiological transition (2019). Tsujita focuses on Bihar,

one of India’s least developed states, to further demonstrate the impact of the rural-urban divide

on human progress (2010). Most of Bihar’s economic growth has occurred in its urban areas and

wealthier districts receive more attention from developmental initiatives. The uneven distribution

of investment reinforces socioeconomic inequalities related to caste, gender, and religious

discrimination (Tsujita et al. 2010). Nagaraja and Veerabhadrappa stress the need to address

these regional imbalances that, if left unchecked, can drive social unrest, migration, and rural

frustration (2018).

Selvaraj and Karan identify growing socioeconomic inequality and health insecurity in

India at large, positing that BJP’s pro-market, neoliberal approach incentivizes private healthcare

sector development, making care costlier and less accessible (2009). Vijaykumar adds that BJP’s

non-inclusive policies allow inequality to persist despite national economic growth because they

fail to facilitate the equitable distribution of benefits, avoid employment issues, and ignore the

need for rural diversification. For example, the share of institutional credit sources declined in

response to the 1991 liberal reforms; the lack of effective credit delivery systems drives financial

exclusion in rural areas and harms the agricultural sector in particular, worsening the rural-urban

divide (2012). In a study of 28 Indian states, Mukherjee and Chakraborty evaluated economic

and human development indices to show that higher per capita income has not translated into

enhanced human wellbeing, attributing that gap to growing inequality (2010).

These scholars offer policy recommendations based on their findings. Mukherjee and

Chakraborty stress the importance of strong governance institutions and mechanisms – including

tax revenue generation, efficient social expenditure, support for the socio-politico-economic

environment – to translate economic growth into human development (2016); Vijaykumar

suggests increasing the quantity and quality of public health expenditures (2012); Nagaraja and

Veerabradrappa recommend investing in rural areas, notably states in the North East with

compact geographic and climatic conditions that limit the region’s potential economic growth, to

close the rural-urban gap (2018); and Selvaraj and Karan demand inclusive policies that ensure
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employment for vulnerable groups, enhance access to essential health services, and protect

households from financial risk (2009).

While economic growth and human development demonstrate a positive association, a

number of factors complicate that link: geography, class, caste, and gender. COVID-19 disrupted

both economic and human development, presenting another complexity. Owing to its recency,

scholars have yet to re-evaluate the relationship between economic and human development in

light of the COVID-19 pandemic. By incorporating the most recent HDI reports, this paper offers

an up-to-date analysis of India’s economic and population health status. This paper distinguishes

itself from the extant literature by honing in on life expectancy as a component of HDI. The final

section offers policy recommendations based on evidence gleaned from the literature review and

derived from economic theory and the supporting data.

III. Application of Economic Theory

Despite its significant economic growth over several decades, India’s HDI has not risen

concurrently. While it seems logical that increased income leads to enhanced health because

higher-earners can afford to consume more medical care, the health production function shows

that health is a complex function affected by more than medical care: lifestyle choices, genetics,

education, environment, and other inputs shape health outcomes. High GDP does not guarantee

other health-promoting features required for human development, and so India’s economic rise

will not in itself yield improved health.

Evaluating medical care as one health input, India spends a small percentage of its GDP

on health care. The World Health Organization reported that India spent 3.01% of its GDP on

health care expenditures in 2019, lower than other BRIC countries – Brazil spent 9.59% of its

GDP on health care in 2019 – and lower than some regional neighbors, with health care spending
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in the Maldives reaching 8.04% (The World Bank 2022). Countries with more government

funding for public health, like the Maldives, see better health outcomes than countries with lower

government health care spending, like India and Afghanistan. Due to its inadequate public health

services, India’s private health care sector has expanded, exacerbating inequality. Private health

care providers are subject to less oversight and regulation, yielding high out-of-pocket expenses

and unpredictable care quality for consumers in need. Relying on private care also deepens the

rural-urban divide because private physicians are less likely to serve rural areas, widening the

geography-based outcome gap (Sengupta et al. 2018). Investing in universal health care to make

health services more affordable and accessible would address two barriers to improved health in

India, but this represents only part of the puzzle.

As noted above, medical care is not the sole input in the health function: environment,

education, genetics, lifestyle choices, and more determine health and developmental outcomes.

Improving the accessibility and affordability of health care only partly addresses the gap between

economic growth and HDI improvement; it is necessary to consider non-economic obstacles that

hinder the adoption of health-promoting behaviors. Non-economic obstacles include awareness

and personal beliefs. Even at high levels of economic development, individuals maintain health-

demoting behaviors if they do not view them as detrimental or if they carry cultural or religious

significance. For example, approximately 47% of men consume tobacco in India, contributing to

the onset of non-communicable diseases (NCDs) and cancers. Smoking prevalence demonstrates

a strong association with sociocultural traits, suggesting that targeted interventions are necessary

for change (Rani et al. 2003). Encouraging the adoption of new behaviors requires educational

interventions and substantial community-based support, else people will retain health-demoting

habits and continue to experience poor health outcomes.

Finally, Indian households affected by NCDs show displaced consumption patterns for

other essentials, bringing poor health outcomes and maintaining the lag between economic and

human development. Indians face high out-of-pocket expenses for medical care because public

health programs are deficient, driving “crowding out”: individuals with higher medical expenses

spend less on essentials like food, opting for cheaper and less nutritious alternatives which drive

poor nutrition and health outcomes. In order to address the gap between economic growth and

human development in India, we must consider the myriad of forces and their interactions. India

struggles to provide sufficient public health services for its population, creating high costs of

care and forcing people to adopt health-demoting behaviors, such as avoiding health care entirely

or cutting other essential expenditures. Because the health production shows that medical care is

only one of many inputs, officials must also address the non-economic forces that hinder human

development from catching up with economic growth.

IV. India’s Human Development Index: GNI and Life Expectancy

India has seen rapid increases to its gross national income per capita, or in the purchasing

power parity (PPP). Excluding the decline in 2020 caused by the COVID-19 pandemic, PPP

increased exponentially from 1991 to 2019. However, HDI rose slowly during this time and

plateaued in 2016 (Figure 2). Life expectancy at birth increased strongly from 59 years in 1991

to nearly 71 years in 2019. Though it decreased down to 69 years in 2021, this drop was mainly

caused by COVID-19, which is beyond the scope of this paper. As mentioned earlier, life

expectancy is one of four components of HDI, and its slowed rate of growth may be attributed to

many factors. Improving medical care and life expectancy, a determinant of HDI, proves crucial

for the future socioeconomic development of India.

Figure 2. Human Development Index and Life Expectancy at Birth 1991-2021.

Gross national income relates to life expectancy and health status, since more well-off

individuals have more resources to spend on curative and preventive care. Wealthier individuals

tend to enjoy healthier diets, experience lower levels of stress, and face less risk in their daily

life. Good health results in longer-lasting employment and consistent income streams; this

creates a beneficial relationship between income and health in turn. Thus, an increase in PPP

should result in the growth of life expectancy, and HDI at large.

V. Ordinary Least Squares: India’s Future Development Potential

We conduct an Ordinary Least Square (OLS) linear regression in Stata to project India’s

potential HDI based on other BRIC countries’ conditions of economic and human development.

OLS regressions take input (observed) values and calculate best-fit estimates for the explanatory

variable. We then compare that projected HDI value to India’s actual HDI to test the lag between

economic and human progress. To build our model, we focus on gross national income (GNI)

and its relation to HDI. Our model does not aim to establish causality between the two variables;

rather we wish to discern trends concerning estimated HDI given GNI data and evaluate how our

estimations compare to the actual data. Although our model may be biased due to the intentional

omission of other HDI-determining variables that are beyond the scope of the paper, we do not
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make causal inferences, so the potential bias does not obstruct our analysis. Our regression

model is described by this equation:

Our first regression examines India in relation to other BRIC countries – Brazil, Russia,

and China – which demonstrate similar economic potentials. The projected HDI comes out to

0.656; India’s actual HDI of 0.633 falls below this value, suggesting that its human development

is falling behind its economic growth. Table 1 shows the results from this analysis. We next

evaluate India’s HDI relative to other South Asian countries – Afghanistan, Bangladesh, Bhutan,

Maldives, Nepal, Pakistan, and Sri Lanka, results of which are seen in Table 2. We calculate a

projected HDI of 0.591 when we examine India in relation to these countries, which India’s

actual HDI value of 0.633 exceeds. This indicates that, in terms of its life expectancy and PPP,

India performs well in comparison to other South Asian countries, reporting a higher HDI than

our model projects. Both regressions showed a significant t-value and high levels of R-squared,

indicating our model’s strength and plausibility.

Table 1. Stata result of linear regression of BRIC countries GNI is regressed on HDI. Countries
included: Brazil, Russia, India, and China.
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Table 2. Stata result of linear regression of South Asian countries GNI is regressed on HDI.
Countries included: Afghanistan, Bangladesh, Bhutan, India, Nepal, Maldives, Pakistan, Sri
Lanka.

Although the results from the second regression suggest that India is doing well in terms

of human development, comparing India to its South Asian neighbors makes for a flawed

argument. India’s economic prowess is much greater than any of its neighbors – its GDP is over

seven times greater than the second largest economy in South Asia, Bangladesh. Therefore, it is

more befitting to compare India to countries that see similar levels of economic growth, like the

other BRIC countries. In that respect, we see that human development in India is lower than it

could be for a large, rapidly growing economy. India’s underperformance relative to other BRIC

countries may be caused by differences in government health care spending, accessibility and

affordability of health services, and awareness among its population.

VI. Policy Implications

Bridging the gap between economic growth and human development demands that the

government implement policies and institutions that address India’s distributive challenges and

respond to its specific health issues. Deficient public health services have driven private care to

expand, confronting consumers with high out-of-pocket expenses and varying service quality.

This makes care less attractive, especially for the already-impoverished; financially-insecure

consumers may avoid care altogether, exacerbating inequality, worsening health outcomes, and
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hindering HDI advances. India should increase its public health spending with an emphasis on

supporting those left behind by the BJP’s neoliberal tilt – including the urban poor, rural areas,

and other marginalized groups – to address the inequality that prevents human development.

Specifically, India should strengthen its health infrastructure, particularly in rural North East

states where economic growth and human development remain poor and prevent India from

achieving a stronger national HDI. India’s government should build more clinics in rural areas to

enhance access to services and support a stronger network of rural health care. Geographically

targeted investments like these will make medical care less expensive and more accessible to

India’s underserved populations, treating the inequality that keeps India’s HDI persistently low.

Second, in response to the rise of NCDs, India’s government should implement

community-level educational programs that raise awareness of and encourage health-promoting

behaviors. Having the financial means to make pro-health decisions does not ensure that

individuals will; they must understand the benefits of those choices else they will maintain

familiar behaviors, even those that are health-demoting like smoking. Because cardiovascular

diseases, cancers, and diabetes are the most common NCDs in India, programs should emphasize

the importance of a healthy diet, the benefits of regular exercise, and the risks of smoking. These

programs should be administered at the community-level, involve diverse local stakeholders, and

recognize the intersection of colonial history, culture, social factors, and politics that shape

health outcomes in India.

Lastly, India should enact monetary disincentives to lower consumer demand for heavily

sweetened and processed foods and drinks, tobacco, and palm oil. Taxes on such goods would

decrease consumption by making them more expensive and healthier alternatives relatively

cheaper. In Mexico, a 10% tax on sweetened drinks resulted in a 6% drop in demand (Misra
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2017) and Kerala implemented a “fat tax” in 2016 on unhealthy pre-packaged foods, sweetened

drinks, and other junk foods (Nair, 2019). India should expand these tax-based initiatives to

include other states and apply to other health-demoting goods, like tobacco. This tax would also

provide additional revenue to the state, which could be used to finance other health policy

initiatives.

VII. Conclusion and Next Steps

Despite being one of the largest and fastest-growing economies, India lags behind in

terms of its human development. Weak public health services due to low government spending

partially explain India’s persistently poor health outcomes, in addition to non-economic forces

like education and personal beliefs that prevent individuals from making pro-health behavioral

changes. Inequalities related to class, caste, gender, religion, and geography further hinder the

attainment of a higher HDI. Moving forward, policymakers must address all of these issues: to

make medical care more attainable, the government should increase public health expenditures;

to overcome non-economic barriers, community-based education initiatives should be pursued;

and in response to health inequality, policies should target those suffering most – rural areas, the

urban poor, women, and scheduled castes and scheduled tribes. Enhancing HDI demands more

than economic development; government branches will have to cooperate with one another and

form public-private partnerships to overcome the challenges that limit India’s human progress.
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