(Bloomberg) -- Prime Minister Narendra Modi’s Bharatiya Janata Party won the most seats in a closely-fought election in the southern state of Karnataka but may not be able to form a government after two rival parties vowed to rule in a coalition.
The BJP is leading in 104 seats, eight short of the majority mark in the 224-member assembly, according to the Election Commission of India. The Congress party, which has governed Karnataka for the last five years, is leading in 78 seats, it said. Regional party Janata Dal (Secular) is ahead in 37 seats.
The inconclusive outcome has paved the way for the Janata Dal (Secular) party, led by former prime minister H. D. Deve Gowda, to play a kingmaker in forming the government. Traditionally, the governor calls the single-largest party first to prove its majority.
The Janata Dal (S) has accepted a Congress proposal for the two parties to form a coalition, Ghulam Nabi Azad, a senior Congress party leader told reporters in Karnataka. The new government would be headed by a chief minister from the Janata Dal (S) party, he said.
"Our numbers put together are more than the BJP," Azad said.
Although there’s not yet a clear winner in Karnataka -- home to India’s IT hub -- the vote will still be seen as an accomplishment for the BJP, as it strengthened its position in India’s south, where it has historically not been popular. And it’s a setback for the revival of the Congress party, which ruled India for most of its independent history, further weakening its standing with the electorate.
Whatever scenario unfolds, the developments mean more risk for businesses operating in the state, said Pratyush Rao, associate director for India and South Asia at Control Risks, a consultancy.
"The fractured mandate and the possibility of a coalition government that prioritizes political survival over ideological cohesion is likely to increase political uncertainty with an adverse impact on the business environment in the state over the coming weeks," Rao said.
Failure to retain Karnataka, a state of more than 61 million people, means Congress will be left with just Punjab, apart from the small hill state of Mizoram and federally-administered Puducherry.
Karnataka, home to local offices of Intel Corp., General Electric Co. and International Business Machines Corp, has swung from party to party since 1985. The electoral contest has descended into bitterness in recent weeks as Modi and Congress President Rahul Gandhi addressed rallies and traded barbs on corruption and farmers welfare policies.
This wouldn’t be the first time in recent memory that a party winning the most seats in an Indian state election fails to form a state government. Last year, the BJP cobbled together coalition arrangements in the smaller states of Goa and Manipur after effectively losing to the Congress party.
The BJP and Congress will next fight in December elections in three key states currently ruled by the BJP -- Rajasthan, Madhya Pradesh and Chhattisgarh.
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