The greatest blow came from Andhra Pradesh, Mr Rao's home state. There, ageing film star NT Rama Rao and his glamorous young wife dealt Congress a stunning defeat. The party lost votes among its traditional supporters, the Muslim minority and the rural poor. The Prime Minister, who had staked his personal prestige on the outcome, has been humiliated.
Mr Rao's economic reforms, welcomed by the growing urban middle class, have brought only ever greater hardship for India's poor farmers and peasants. The Prime Minister, who took charge of the campaign in the south, may come under fire from powerful rivals in his party, notably Sharad Pawar, Chief Minister of Maharashtra. Congress had already lost its strongholds in the north in previous state elections. It was also assumed, wrongly, that Mr Rao, a southerner, could drum up support in his home territory.
The defeat comes hard on the heels of a report in the Times of India that Mr Rao, 73, has heart trouble and may need a bypass operation in the US next year. A spokesman claimed the report was baseless, but Mr Rao did appear exhausted at the end of a bruising election campaign.
In Andhra Pradesh, the future Chief Minister, NT Rama Rao, famous for playing Hindu gods in Indian movies, said: "Congress had flouted democratic norms, and the people have realised this." The former actor proved more charismatic than the sour-faced Prime Minister, helped by impossible promises such as offering to slash the price of rice to two rupees (about 4p) a kilo.
Mr Rao's economic reforms are clearly not trickling down fast enough to the poor. Instead of speeding up the pace of the reforms, which removed subsidies on fertilisers and other agricultural necessities, Mr Rao will be under pressure from his party - anxious about the general election due in mid-1996 - to put the brakes on.
An MP said: "Reforms have made Congress the darling of the middle classes, but they have turned the poor against us."Reuse content