BANGALORE, India — Lawmakers cleared the way on Wednesday for India to forge a single economic zone from its thicket of overlapping federal and state taxes, the most important economic measure since India opened its markets in 1991.

Potentially one of the most dynamic economies in the developing world, India is hampered by a bewildering array of state-by-state tax codes that discourage doing business across state borders.

The Goods and Services Tax is widely viewed as a breakthrough that will allow the authorities to confront the problem, eventually creating a more unified economy that will allow businesses to expand nationwide far more easily.

“This is long overdue but hugely consequential for the ease of doing business, and for demonstrating to the outside world that India is dragging its economy into the 21st century,” said Milan Vaishnav, a senior associate in the South Asia program at the Carnegie Endowment for International Peace.

Economists forecast that the new tax scheme, which replaces 15 existing state and federal taxes, could increase the country’s economic growth rate by between 0.5 and two percentage points.

The tax patchwork dates back to 1991, when the government embraced free-market policies and devolved power to the states, including authority over taxes. For more than a decade, as it became increasingly clear that the overlapping tax codes hampered growth, Indian leaders have pushed for a radical simplification, only to be halted by political opposition. That hurdle now seems to have been cleared.

Though a long series of legislative steps must be taken before the new tax system goes into effect, Wednesday’s approval of a constitutional amendment by the upper house of Parliament, which is not controlled by Prime Minister Narendra Modi’s party, was seen as the most daunting obstacle.

“It’s important for Modi,” Mr. Vaishnav added, “who has been reeling under this criticism that he hasn’t done enough in terms of big-bang reform. It completely reshapes how business is going to be done.”

The benefits of the new tax regime are likely to emerge gradually, and may not be evident before Mr. Modi’s party seeks re-election in 2019.

It is likely to lead to an inflationary bump. And the government’s chief economic adviser, Arvind Subramanian, warned that the single tax will be “fiendishly, mind-bogglingly complex to administer.”

Over the long term, though, it is expected to attract foreign investment and bring down the cost of capital goods, lift manufacturing and exports, increase tax collections and — perhaps most important, in a country where one million young people enter the work force each month — create jobs.

“This will be the mother of all economic reforms in India so far,” said Sachin Menon, who oversees indirect taxes at KPMG India, an accounting and consulting firm.

Business leaders said the change would have a profound effect on their daily lives. Praveen Khandelwal, a senior leader of the Confederation of All-India Traders, said businesses currently were “harassed and victimized” by the cascading demands of multiple tax authorities.

“Most of the time we are busy in complying with those taxation formalities, collecting taxes, depositing taxes, submission of forms, our money stuck in the system, and other issues,” he said. “We don’t find time to do business.”

Sachin Bansal, the co-founder of an e-commerce site, Flipkart, described the idiosyncratic tax codes that his business must work around: double taxation in Karnataka warehouses; a $75 limit on shipments to Uttar Pradesh; confiscation of goods and cash in Kerala.

In a recent editorial, he described the vote as India’s reverse Brexit moment. “Because of geographical constraints and artificial restrictions placed by the current tax regime, quality products are expensive and affordable products suffer from poor quality,” he wrote in The Economic Times.

The drawbacks of state-dictated tax policies have long been recognized, but lawmakers were stymied. Simplifying the system required the political muscle to persuade states, especially large, wealthy ones like Mr. Modi’s home state of Gujarat, to surrender control over tax revenues.

A Goods and Services Tax bill was first introduced by the Indian National Congress party in 2011, but has since been blocked by whichever of the two main parties was not in control of Parliament. Before 2014, it was Mr. Modi’s Bharatiya Janata Party, commonly called the B.J.P., that disapproved of the measure. The Congress Party has opposed it since then.

Resistance to the plan had eased in recent months, as the B.J.P. put greater effort into winning over the smaller regional parties that had opposed the bill. Meanwhile, the Congress Party’s share of seats in the Parliament’s upper house, the Rajya Sabha, has been shrinking.

“I think the logjam broke now because the Congress found it was largely isolated,” said Mihir Sharma, a columnist and senior fellow at the Observer Research Foundation.

Introducing the new system will not be quick or easy, and the government will be hard pressed to put it in place by the current deadline of April 1, 2017.

Technically, the parliamentary vote on Wednesday approved only a constitutional amendment on the new tax system, the first of many steps needed to enact the tax measure, usually referred to by its initials, G.S.T. The constitutional amendment must also be approved by a majority of India’s state legislatures and by the president. Once it is approved, which is expected, Parliament must enact legislation to create the new tax system, and individual states must pass their own laws.

Still to be settled is the thorny issue of tax rates. States will want high rates, to maximize revenue, and the central government will push for lower rates to avoid sparking inflation, said Pranjul Bhandari, the chief India economist at HSBC bank in Mumbai. “You have to tread the very thin line between making political parties happy and making the state governments happy,” she said.

India’s economy is growing at a robust 7.6 percent while enjoying the lowest inflation in decades. But job growth has been sluggish, and the corporate sector remains starved of cash.

Tension over the economy’s performance came to a head this summer, when India’s respected Central Bank governor, Raghuram Rajan, who had resisted pressure from right-wing leaders to make deep cuts to interest rates to spur growth, decided to return to academia after his term ended in September. Mr. Modi’s government followed up, almost immediately, by throwing open new sectors to foreign investment.

Surjit Bhalla, a macroeconomic adviser on India to the Observatory Group, a consultancy in New York, compared the new tax regime to the industrial deregulation of 1991 and said it should put to rest any doubts about Mr. Modi’s credentials as an economic modernizer. “It’s a mega-reform, and it comes under his leadership, which is why he and the B.J.P. were very keen to get it passed,” he said.

Source: www.nytimes.com