The Human Development Report (HDR) 2005 has come out with good news for Nepal in terms of Human Development Index, a measure of life expectancy at birth; Gross Enrolment Ratio and GDP per capita (PPP US $). Out of 177 countries, Nepal stands at 136 in HDI rank, one step behind Pakistan and three steps ahead of Bangladesh in South Asia.

Nepal ranked 140 in HDR 2004. Data recorded in HDR 2005 for 1975, 1980, 1985, 1990, 1995, 2000 and 2003 shows an increasing trend in HDI value. It increased to 0.526 in 2003 from merely 0.423 in 1990. The presentation of increased HDI rank without analysing supplementary indicators is as risky as explaining the growth or decline in productivity without linking it up with living standards. One should be able to make a proper comparison of any event on its impact in real life situation. Therefore, an attempt has been made to first crosscheck the authenticity of an increase in HDI value and examine the status of supplementary indicators explained below if they are in a position to sustain the growth observed in HDI value.

One must consider data on three major HDI indicators. For example, life expectancy at birth is estimated to remain at 61.4 years for the period of 2000-05 from 59.6 years in 2002. It is an increment of survival by 1.8 years, which is very close to the two years increment of life expectancy in the developing countries as a whole since 1990. The Gross Enrolment ratio remains same as 61 per cent during 2001-02 through 2002-03. But GDP per capita value in PPP US $ terms has increased from 1,370 in 2002 to 1,420 in 2003. As long as the indicators to calculate HDI value remains unaltered, the HDR 2005 justifies HDI rank.

Secondly, as mentioned above, the examination of the development of supporting indicators cannot be found that encouraging. Unless we address such issues, I suspect the gain from increased HDI value will be much less effective for making any significant impact on freeing the country from abject and dehumanising conditions of extreme poverty. Consider some examples. In per capita health expenditure, Nepal is little better than only Bangladesh and Pakistan in South Asia. In net primary enrolment ratio, it is little better than only Pakistan. In terms of average annual growth rate of 2.2 per cent during the period 1990 through 2003, Nepal is slightly above only Pakistan. Since achievement in these indicators is not very exciting, one should take the impact of increased HDI value with caution.

We must agree, since 1990, there are visible human development gains globally in the life expectancy at birth; in reduced child mortality compared to relatively higher 1990 levels; in dropout rates from school and also 130 million people escaping from extreme poverty. This is certainly encouraging progress. However, as one narrows down human development to individual levels, we could see a reversal in human development as well. For example, the HDR 2005 records the data for 2003 and states, 18 countries with the combined population of 460 million people registered lower scores on the HDI than in 1990. Out of these countries, 12 are in sub-Saharan Africa and six in Commonwealth of Independent States. Such reversal of HDI score is quite challenging. Some interesting examples can be cited to present a success and failure story.

A happy development at present is that 130 million people are out of extreme poverty but the sad story is that there are 2.5 billion survivors who earn less than US $2 a day. Increased allocation in health services has made it possible to find two million fewer child deaths a year but there are 10 million preventive child deaths every year as well. Similarly, 1.2 billion people gained access to clean water but 2.6 billion lack access to sanitation. As the progress is mixed, we should have a balanced view. The lesson is not to underestimate the development and exaggerate the outcome.

To conclude, the HDR 2005 is being made public in the midst of violent conflict in Nepal. Since the casualties during the conflict are found higher from diseases and malnutrition than from arms, we should now reconsider the so-called battlefield strategy as a response to maintain law and order. The critical issue in this regard is, can Nepal sustain such strategy? In comparison to 1997-98, the internal security (police) expenditure during 2001-02 has increased two-fold. As percentage of GDP, internal security increased from 0.83 per cent in 1997-98 to 1.43 per cent in 2002-03. The defence expenditure increased from 0.86 per cent to 1.39 per cent during the same period. Interestingly, the expenditure on social and economic services declined from 3.43 per cent and 5.95 per cent to 2.73 per cent and 4.13 per cent respectively during the same period as percentage of GDP. One can safely say that a security expense is thus being made at the cost of social and economic services. It indicates a big challenge to meet MDGs, especially on education, health and environmental sustainability.

Professor Pyakuryal is president, Nepal Economic Association