Indian state elections could halt Prime Minister Modi's winning streak

Indian Prime Minister Narendra Modi is staring at election losses in big heartland states, polls show, suggesting that farm distress and a lack of jobs for growing numbers of young people could prove stumbling blocks for his re-election bid in May.

India counts votes on Tuesday from five states that chose new assemblies over the past month, but exit polls show Modi's ruling Bharatiya Janata Party (BJP) could lose the three most important races, while it has little presence in two smaller states dominated by regional parties.

The loss would be the biggest for Modi's Hindu nationalists since they swept to power in 2014 general elections, followed by wins over the past four years in 22 of India's 29 states, on promises of thousands of jobs and a doubling in farm income.

Politicians view state polls, though they are usually decided by regional issues, as a pointer to the mood of the BJP's traditional voting base, ahead of a general election that must be held by May.

"The results will set the tone for the 2019 election," said Sachin Pilot, a leader of the main opposition Congress party.

Congress is tipped to win in the western state of Rajasthan, scrape through in the central state of Chhattisgarh and is locked in a photo finish with the BJP in neighbouring Madhya Pradesh. Rajasthan and Madhya Pradesh are among India's biggest states.

"The BJP has made a lot of tall claims about income, jobs etc," Pilot added. "They came out with 28 slogans, 'Swachh Bharat' ('Clean India'), 'Make in India' and such, but how many were implemented?"

Modi remains the frontrunner for the general election, however, trailed in personal ratings by his main challenger, Congress president Rahul Gandhi.

Modi promised to clean up India and turn it into a top tourist destination as well as lift the share of manufacturing in its economy to a quarter of gross domestic product, following the example of China.

But it has grown only slightly, to 17 percent, with nearly all the ambitious clean-up programmes for cities and the river Ganges, as well as the Make-in-India campaign to build a domestic industrial base, largely unfulfilled.

Anger over weak farm prices, slow growth in rural wages and small businesses hit by a new nationwide goods and service tax has also boiled over, provoking protests by tens of thousands of farmers in Delhi and Mumbai.

Although the BJP might drop a few seats because of anti-incumbency sentiment, it was not losing everything, as some surveys forecast, said party spokesman G.V.L. Narasimha Rao.

"They have underassessed the BJP," he added. "They have done it previously too."

Surveys often prove wrong, partly because it is tough to forecast the outcome of elections involving India's millions of voters.

Still, a poor performance could prompt the BJP to push its brand of Hindu nationalism harder, politicians and analysts say.

"The BJP campaign will focus on nationalism, Hindutva and corruption," said Shekhar Gupta, a political analyst, using a term that refers to the party's Hindu-first plank.

Hindus make up about 80 percent of India's population of 1.3 billion, while Muslims are about 14 percent.

Already hardline groups associated with the party have reignited their campaign for a temple to the god-king Rama at a site where Hindu zealots razed a 16th-century mosque in 1992.

Thousands of Hindu monks and activists linked to the BJP gathered in New Delhi on Sunday in a show of force to back the temple.

Hindu fringe groups have stepped up a campaign against the slaughter of cows, which many in India consider sacred, as vigilante groups target Muslims in the livestock trade.

Modi is expected to try to recover political ground with giveaways in the next few months for small businesses and farmers, who make up a big chunk of voters.

"The state elections will be seen as a litmus test of Modi’s popularity," said Simon Finch, fund manager at London-based Ashburton Investments.

"However, we would expect any blemishes to be met with a continuation of the populist measures increasingly evident during the past four years."

If the BJP did well, that would be a further catalyst for the market, said Mike Sell, head of Asian investments at asset management firm Alquity, who sees Modi's economic measures, such as a unified goods and services tax, eventually paying off.

"Even if they did badly, they wouldn't make us do anything negative and we will use any weakness as a buying opportunity."