India is now officially the hottest major economy as per the new GDP computation methodology. Given that many Asian countries began their journey out of poverty at roughly the same time, comparisons with India are logical. South Korea, in particular, makes for a good comparison.
Here’s why: a) Both countries were roughly the same size in 1990 (about $300 billion in GDP); b) they historically suffered from extensive poverty; c) they have hostile neighbours (South Korea is still officially at war with the North); d) they began to assert their economic might from the late ’80s; e) they have their private sector dominated by giants and f) suffered endemic corruption and rent-seeking behaviour.
The only key difference is the population size: India’s large population is viewed as a constraint or a demographic dividend, depending on whom you talk to.
South Korea is today considered to be a developed country, a long way off from 1988 when the Seoul Olympics was conducted in a city of slums. Samsung, Hyundai, Posco, LG and Kia are Korean companies that have asserted themselves globally. Conversely, India’s largest companies have grown either on domestic strengths or as service providers to the developed world.
Interestingly, all these Korean companies have a significant Indian presence but corporate India’s presence in South Korea is marginal.
Also worth considering is the fact that South Korea has prospered despite military tensions with the North, huge defence spending, rampant corruption at the highest level, multiple health epidemics and the ’97 Asian financial crisis.
While the machismo around beating China’s GDP growth rate makes good headlines, this much smaller Asian country offers a better benchmark.
Here’s a look at the graphical comparison between the two Asian economies.
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(This story appears in the 24 July, 2015 issue of Forbes India. To visit our Archives, click here.)