Slender lead seen for India

By Surojit Gupta

NEW DELHI (Reuters) - The ruling Congress-led coalition was slightly ahead of the opposition Hindu-nationalist alliance in India's general election, but both groups fell well short of a parliamentary majority, TV projections said on Wednesday.

A raft of exit polls showed both alliances would need new partners, renewing concerns that a shaky coalition government will emerge at a time when Asia's third largest economy is faced with a slowdown and instability in neighbouring Pakistan.

Exit polls have had a mixed record in the past, given the difficulties of assessing an electorate of 714 million people, or more than twice the population of the United States. The polls were way off the mark in the last 2004 general election.

Prime Minister Manmohan Singh's Congress party-led coalition is ahead with 185-205 seats in the 543-member lower house of parliament, an exit poll by the CNN-IBN television said.

An alliance led by the opposition Bharatiya Janata Party (BJP) would take 165 to 185 seats, leaving both the main political formations far short of the 272 needed for a majority.

A national projection by Headlines Today news channel also gave the Congress coalition a lead, but below its showing in the 2004 election.

"We are looking at political uncertainty and horse-trading," Amulya Ganguli, a New Delhi-based political commentator, said.

If confirmed by actual results, the outcome would mean a fall in seats for the Congress alliance compared with the 2004 election and a boost in seats for the BJP-led alliance, muddying the waters further.

"The point is all the allies of Congress today present or prospective are suffering and all the allies of the BJP, present or future are doing very well. That is the fundamental distinction," the BJP's spokesman Ravi Shakar Prasad said.

The rupee fell 0.9 percent over the previous day's close as investors pared positions on concerns that the election may not produce a clear winner. Shares were down 1.1 percent.

Federal bond yields fell with investors drawing comfort from the slender lead of the ruling Congress ahead in the race to form a new government. The benchmark 10-year bond yield ended at the day's low of 6.33 percent after earlier rising to a four-week high of 6.47 percent.

VOTE COUNT

The actual count of votes is scheduled for Saturday and results from all the races to the 543-member lower house of parliament will be known that day.

Congress and the BJP are seen as taking broadly similar positions on Pakistan, with neither seen likely to give substantial ground until they are convinced Islamabad has dealt with the militants India blames for an attack on Mumbai last November.

Nor do either party have much room for manoeuvre on the economy, because a shaky coalition is seen as unlikely to carry key reforms such as raising foreign investment limit in the insurance sector and privatisation of state-run firms.

Regional groups are expected to extract their pound of flesh in return for support to a coalition government, including a say on prized cabinet positions such as finance and foreign affairs.

The "Third Front," a loose coalition of smaller parties spearheaded by the communists and which could hold the balance of power, could get 105 to 121 seats, a poll by C-voter polling agency said. The poll was conducted for India TV and UTV Business.

It includes the caste-based Bahujan Samaj Party (BSP) whose maverick leader Mayawati harbours prime ministerial ambitions. The poll projected BSP winning 26-32 seats which may be enough for her to leverage a key role in any government formation.

The election, projections showed, may have bruised the communists, leaving them with about 32 seats, down from more than 60 they won in 2004, weakening their ability to hold the balance of power in any new government.

But Congress opened the door to reaching a deal with the left.

"All possibilities are open. We must not forget we worked with the left for four-and-a-half years," Kamal Nath, Congress' federal trade minister said, referring to the communist support to the outgoing government until they quit last year.

The communists quit Singh's coalition last year to protest a nuclear deal with Washington.

(Reporting by Reuters reporters; Writing by Sanjeev Miglani; Editing by Alistair Scrutton)

Article Published: 13/05/2009