K-Pop and lessons in economy, Koreas' gift to the world
India and South Korea had comparable per capita incomes in 1961 - with India at USD 85.4 and Korea at USD 93.8. Fast forward to 2019 the gap between the countries is immense with USD 2,104.1 and USD 31,762 respectively. This wide gap has come into existence in less than 50 years.
India stood at par with South Korea, Taiwan, Singapore, and China in the early 1950s. While in the mid-1960s, the former three opened up their economies, China and India continued to practice a closed economic policy. South Korea implemented export-oriented policies that resulted in a boost of 8.97% per year between 1960-2000. Their GDP made a sizeable jump from USD 23.3 billion to USD 724.6 billion.
What caused this growth?
Labour-intensive exports accounted for 72.5% of Korea’s good exports by 1972. This was one of the biggest reasons for the massive growth of the economy of Korea. These products included plywood, cotton fabrics, clothing, footwear, wigs, etc. and the demand kept growing around the world.
This expansion gave way to job creation and people from agriculture began to move to the manufacturing sector. This led to a rise in incomes and a demand was created for these services. Urbanization followed, and that ultimately meant a rise in the GDP.
Not only did the country make economic policy changes, but they also looked internally. Education was encouraged, and there were important reforms made. One of them, for instance, was to encourage savings amongst the citizens. In 1965, the deposit interest rates were increased in order to have high savings that would lead to higher investments.
What did India do in the time being?
While the economy of South Korea was opened up in the 1960s, India decided to end its closed economy only in 1991. While exports increased, they were not as labour-intensive as they should have been.
Even in the past decade, India’s exports have largely been engineering products rather than labour-intensive industry products such as textiles, leather, etc. Agricultural exports to some extent have added to a growing GDP, but so far, India has been unable to reach its economic potential.
Indian firms that are in the manufacturing sector are small, and most of them face a number of challenges. They lack infrastructure, government support, and the necessary permits often delay their working process by years.
Economic reforms are required in the industrial sector that can lead to a boost in the Indian economy. With the recession-like condition that is prevailing, any sector that can contribute to the GDP’s growth must be given incentives to grow.
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