The *growth experience of India and South Korea: An empirical study

Economic development is demanded and sought by all societies and people of the world; there is an inherent urge and need to progress and better oneself in every person. This “betterment” most often than not means to improve one\u27s earning power, one\u27s income, and one\u27s economic ability. The same concept when applied to nations is called “Economic Development.” The focus of this dissertation is to research and understand the transition of the South Korean economy and contrast this with the development experience of India. The rapid rate at which the Korean economy developed makes it unique and warrants a close study of the socio-economic models that were used. The World Bank (1993) study of East Asian Economies attributed the Korean success to the existence of the right macroeconomic fundamentals and emphasized the importance of macroeconomic variables in generating the right economic environment for growth. There are intuitive reasons for the comparison of the two economies—South Korea and India have many characteristics in common such as large government presence, import substitution industrialization strategy, a financial sector where government owned banks have dominated and a large unorganized financial market exists. Both countries had more or less the same GDP growth rate in 1962 (2.7% for India and 2.1% for South Korea). However, over the years while Korea\u27s rate of growth started increasing rapidly at around 9%, India\u27s growth rate remained stagnant at 3.5% till 1984. Both had predominantly agrarian economies at the beginning of their journey as independent republic\u27s in the late 40\u27s, widespread malnutrition, low levels of education, almost nonexistent foreign trade, low per capita incomes and material impoverishment. However, in the late 60\u27s South Korea\u27s economy went through a metamorphosis of sorts relative to India\u27s economy that progressed at a much slower pace