Amidst growing concerns over persistent inequality, the paper computes for the first time ever, an Inequality-adjusted Human Development Index (IHDI) for states in India. Three dimensions of the Human Development Index- income, education and health are adjusted for inequalities across the states.

The 2010 UNDP HDR entitled The Real Wealth of Nations: Pathways to Human Development focuses specifically on inequalities in human development attainments across countries. To quantify the potential loss because of such inequalities, the Report introduces three new indices, viz., Inequality-adjusted Human Development Index (IHDI), Gender Inequality Index and Multi-dimensional Poverty Index.

The Government of India (GoI) has been concerned about rising inequalities and uneven distribution of the benefits of growth. Accordingly, the thrust of the 11 th Five-Year Plan (2007-12) was on inclusive growth. The forthcoming 12th Five-Year Plan is expected to deepen and sharpen the focus on inequalities.

In view of the above, this paper presents a methodology and provides estimates for the Inequality-adjusted HDI for Indian states. The paper is organized as follows: The first section focuses on the methodology adopted to arrive at these estimates and data sources utilized. The second section outlines the IHDI estimates for India’s states and findings from the analysis. The paper concludes by highlighting key areas for further research and policy interventions.