Defeat in state poll may force Vajpayee into fragile coalition

A leading ally of India's ruling coalition has been trounced in state elections, delivering a blow to Prime Minister Atal Behari Vajpayee just two days before results are due in the general election.

A leading ally of India's ruling coalition has been trounced in state elections, delivering a blow to Prime Minister Atal Behari Vajpayee just two days before results are due in the general election.

The Chief Minister of the Andhra Pradesh region, Chandrababu Naidu, resigned after the defeat, which he accepted "with humility" after nine years in power. The blow to Vajpayee came as exit polls from the world's largest election were yesterday indicating India would have a hung parliament.

Results are expected on Thursday and could revive the political momentum of the Nehru-Gandhi dynasty. Their Congress party performed well in Andhra Pradesh.

The country's stock market recorded its biggest fall in four years upon the forecasts that the prime minister's governing coalition would fail to get a majority.

Before the mammoth election process got under way last month it had been predicted that the National Democratic Alliance (NDA), led by Mr Vajpayee and the Hindu-nationalist Bharatiya Janata Party (BJP), would retain power. But it now appears his allies will lose more seats than expected.

Investors have been queuing up to tap into India's economic boom, but now many fear a weak or unstable coalition in parliament could slow - or even halt - economic liberalisation.

Pollsters now say Mr Vajpayee may have to seek support from smaller groups and independents to stay in power. That will leave him with a weak and unstable coalition, which may not be able to push through market-friendly economic decisions.

Three exit polls, conducted by New Delhi Television-Indian Express, Aaj Tak and Zee Television, have also suggested the main opposition Congress party may stake its claim to form the next government with support from communist parties and regional groups.

In lieu of their support, the communists will surely want the new government to go slow on privatisation and opening up the Indian economy.

The exit polls - which have been wrong in recent state elections - show Mr Vajpayee's coalition failing to win the 272 seats needed to control parliament and form a stable government. That could mean fierce bargaining to enlist the support of smaller parties and independent lawmakers.

"Talks, claims, negotiations going on," said the Hindustan Times on its front page yesterday. "BJP leaders privately admitted they were now looking for new allies to muster the numbers they needed."

In the regional elections in Andhra Pradesh, in southern Indian, Mr Naidu's opponents said he focused too much on wooing high-tech companies to his state capital, Hyderabad, while neglecting millions of farmers whose incomes have steadily declined.

"The sufferings of the common man are evident from this result," Dr Y S Rajashekhar Reddy, the Congress politician tipped to be the new chief minister, said. "The Naidu government was essentially pro-rich, and that wasn't liked by the masses."

Mr Vajpayee's coalition went into the elections bolstered by a booming economy, a blossoming peace process with Pakistan and a rapidly growing middle class. It was thought that these factors would secure NDA a comfortable win.

Meanwhile, Congress and its allies campaigned for a more secular government and championed the rural poor, who they say have been left out of India's new prosperity.

Although Congress is now in opposition, it monopolised Indian politics for most of the first four decades after independence from Britain, with the Nehru-Gandhi clan at the helm.

The Congress party produced India's first prime minister, Jawaharlal Nehru. His daughter, Indira Gandhi, and grandson Rajiv also were prime ministers and both were assassinated. The party is now led by Sonia Gandhi, Rajiv's widow.

About 360 million to 400 million voters participated in the three-week election. Related violence killed 48 people, fewer than half the deaths that occurred in the last elections in 1999.