India aims to become a developed nation by 2047, marking 100 years of Independence. It can learn valuable lessons from the economic trajectories of Japan, South Korea, and Taiwan over the last century.
Japan’s rise to economic dominance is marked by strategic policies, technological innovation, and societal commitment. Early 20th-century industrialisation and post-WWII reconstruction, supported by the US Marshall Plan, set the stage for recovery. In the 1950s and 1960s, Japan adopted export-oriented industrialisation, excelling in high-quality manufacturing with global leaders like Toyota, Sony, and Honda. Emphasising education, R&D, and continuous improvement (kaizen), Japan developed a skilled workforce.
The 1970s and 1980s saw rapid GDP growth and high living standards through technology and infrastructure investments. Despite stagnation in the 1990s, Japan’s technological focus has preserved its global economic role. Japan’s globally competitive industries include: (1) Automobiles: Toyota, Honda, and Nissan; (2) Consumer electronics: Sony, Panasonic, Canon; (3) Robotics and automation: Fanuc, Omron, Mitsubishi Electric; and (4) Precision machinery: Takeda Machinery Company, Mazak Corporation.
During Japan’s explosive growth phase, its GDP per capita increased 10-fold from 1950-1980, and the Nikkei 225 surged approximately 65 times.
Korea’s transformation
South Korea evolved from poverty to economic prowess through strategic planning, industriousness, and innovation. Post-Korean War, the country focused on rapid industrialisation and economic reform. Under Park Chung-Hee in the 1960s and 1970s, Five-Year Plans prioritised export-oriented industrialisation, boosting heavy industries like steel and shipbuilding with government support.
The rise of chaebols such as Samsung, Hyundai, and LG drove growth through diversification and technological advancement. Transitioning to high-tech industries in the 1980s and 1990s, South Korea became a leader in electronics and IT.
Despite challenges like the 1997 Asian financial crisis, strategic reforms enabled a strong recovery. South Korea’s globally competitive industries include: (1) Electronics and semiconductors: Samsung, LG Electronics; (2) Shipbuilding: Samsung Heavy Industries, Hyundai Heavy Industries; and (3) Automobiles: Hyundai, Kia.
During South Korea’s high growth phase, GDP per capita improved more than 50-fold from 1960-1990, with the KOSPI index increasing nearly seven-fold from 1983 to 1990.
Taiwan’s rise
Post-WWII and Chinese Civil War, Taiwan restructured its economy with land reforms, infrastructure, and education. The 1950s and 1960s saw rapid industrialisation with an export-oriented strategy in textiles. By the 1970s and 1980s, Taiwan pivoted to high-tech industries, establishing the Hsinchu Science Park in 1980 and fostering global leaders like TSMC in electronics and semiconductors.
Taiwan’s globally competitive industries include: (1) Semiconductors: TSMC; (2) Electronics manufacturing: Hon Hai, MediaTek; (3) IT hardware: Acer, Asustek; and (4) Optoelectronics: Epistar and AU Optronics
Taiwan’s GDP per capita improved 50-fold from 1960-1990, with the TAIEX rising approximately 45-fold from 1966 to 1990.
Path forward for India
To achieve its vision of becoming a developed nation by 2047, India can draw inspiration from these case studies. Common elements include progressive government reforms, manufacturing-led growth, and incentivising industries through performance-based initiatives.
India has already made meaningful strides by focusing on manufacturing and implementing Production Linked Incentive (PLI) schemes across multiple industries, significantly improving GDP per capita over the past decade. In this context, the recent Budget was a step in the right direction as allocation towards manufacturing continued to remain high.
However, to ensure sustained success, India must maintain “policy continuity” over at least a decade and focus on developing globally competitive industries.
It is worth noting that equity markets in Japan (65x), South Korea (10x), and Taiwan (45x) saw substantial appreciation during their growth phases. Likewise, Indian equity markets could also be rewarded disproportionately, as the country makes this transition over time.
The writer is Chief Investment Officer-Equities of Edelweiss Asset Management Ltd. Views are personal