The author has reviewed methodology followed by the UNDP's Human Development Reports from beginning till the latest Report particularly with reference to its treatment given to income component in the computation of Human Development Index for various countries. A closer look has been taken on Atkinson based formulation of utility function adopted by UNDP in the Human Development Reports during 1991 to 1998 for discounting or adjusting the income levels (real GDP per capita in countries), exceeding a threshold level of income.

An alternative multi-step formulation of the utility function is proposed, as a substitute for the Atkinson based approach, without sacrificing the premise of threshold income level which happened to be a concept strongly advocated by UNDP from 1991 to 1998 but suddenly dropped thereafter due to trivial reasons. The proposed alternative formulation is shown to be better than the Atkinson based formulation. The impact of our proposed multi-step utility function on the previous rankings of HDRs is assessed for different countries of the world.