Indians celebrating the 70th anniversary of independence this week have cause for fresh optimism about the future. Though Prime Minister Narendra Modi has not been a radical reformer during his first two years in office, he has not done too badly so far with tax reform, thanks to the support of various political parties. Such consensus on major issues has been hard to come by in the past because of myriad diversities. Sectarian, caste and regional interests contribute to divergent pulls. That India, despite all these, survived as a united nation must count as a miracle. Its sister state, Pakistan, was cleaved in two in less than a quarter of a century after Independence.
Despite stiff challenges, like massive poverty, India has grown into a major power, boasting Asia's third-biggest economy after China and Japan. At a time when global markets are in a funk, its claimed growth rates of about 7.6 per cent are impressive. It leads in knowledge process outsourcing, efficiently shoots satellites into space at the lowest costs, and has grown a bustling business sector. It is the fastest-growing market for mobile telephony and, surprisingly for a nation at its stage of development, has services as the biggest chunk of the economy. While China is the unquestioned Asian miracle story, successfully lifting more than 600 million from poverty, India is poised to strut its stuff as well.
What will stand India in good stead is the promise offered by goods and services tax (GST) legislation, which cleared the Upper House of Parliament last week after years of debate. The ratification of the Bill by a majority of states will facilitate the formation of a single market, perhaps as early as next April. The GST Bill also has implications beyond the economy, because it portends a cooperative federalism that bodes well for the nation of 1.2 billion. GST introduction would not only crimp corruption and reduce wastage - visibly represented by long lines of trucks waiting at state borders to clear local levies - but also add as much as 1.5 to 2 percentage points to economic growth. Double-digit economic expansion for the next decade and more, not inconceivable, would not only help the nation find jobs for the 1.5 million that enter its job market every month, but also erase some of the painful development comparisons made with China.
Singapore companies ought to take note. Despite being advantaged by a political leadership that has developed an excellent relationship with the giant, its businesses - with a few exceptions like Ascendas - seem lukewarm about prospects in the subcontinent. As Prime Minister Lee Hsien Loong prepares to visit the country later this year, entrepreneurs ought to review their South Asian strategies. For the wider Asean too, a unified Indian market is a big opportunity. Notwithstanding the challenges posed, it too must seize the day.