More than six decades after it achieved independence, India has yet to have a single internal market, with its economy divided up by state taxes on commerce.

That may be about to change, following the reversal by one of the biggest foes of a national sales tax -- Narendra Modi, the prime minister who took office in May. After opposing a goods-and-services tax during his 12 years running Gujarat state, Modi has pulled his ruling party behind the idea and plans to enact it within eight months.

Success would mean replacing more than a dozen types of tax that increase incentives for corruption, and offer the economy a boost of as much as 1.7 percent, according to the National Council of Applied Economic Research in New Delhi. Modi, who once said the levy was “impossible” to implement, now needs the revenue to trim a federal deficit.

“This is the easiest and most important reform for the new government to push forward,” Sudhir Kapadia, a partner for Ernst & Young LLP in India, said by phone. “There are huge leakages in the current system. With a uniform system, businesses will finally be able to make decisions purely on the grounds of profit.”

David Fuller's view

Modi was right when he said the levy was “impossible” to implement when the admirable Manmohan Singh was Prime Minister.  Singh often knew and said what needed to be done but he had neither Modi’s majority nor the toughness to make key decisions within his own party.

Narendra Modi is overseeing one of the most interesting modernisations ever attempted, and for an economy and large population with enormous potential.  Since few international investors were interested in India a year ago, there is a wall of money which could be directed towards this market over the next four years or more.  India is currently consolidating gains and global reactions, particularly those occurring for reasons which may have little direct influence on India, are opportunities for long-term investors.