JAIPUR, India -- With counting underway in India following a series of intensely-fought state elections, Prime Minister Narendra Modi's Bharatiya Janata Party appears set for significant losses in its heartlands, potentially damaging its prospects in national polls due by May.
The Hindu nationalist BJP holds power in the three largest of the five states being contested -- Rajasthan, Chhattisgarh and Madhya Pradesh -- but has faced a concerted challenge from the Indian National Congress, the country's main opposition group.
Exit polls predict a comfortable win for the INC in Rajasthan, which has not voted for an incumbent for two decades. An aggregate of polls compiled by NDTV showed the two parties neck and neck in Madhya Pradesh and Chhattisgarh, with no one likely to secure an outright majority in either state.
Voters in these states have been frustrated by unemployment and pressures on the agricultural sector amid India's slowing economy. Growth softened to 7.1% for the three months ended in September, down from 8.2% in the previous quarter.
The BJP "has done nothing" for peasants burdened by loans, said Abhilasha, a 28-year-old homemaker from a farming family in Jaipur, the capital of Rajasthan.
"Farmers want loan waivers and higher prices for their crops but the government has made only empty promises," she said, adding that she voted for the INC this time.
Akash Singh Tanwar, 25, from Rajasthan's Kotputli area, however, voted BJP. "Though I'm not happy with the BJP government in the state, especially because there was hardly any effort by it to create employment for youth," he said, "I stayed loyal to the party just because of Modi, who has been doing great work in eradicating corruption and terrorism countrywide."
In the state of Telangana in the south, the Telangana Rashtra Samiti regional party is expected to return to power, while the INC is expected to lose control of Mizoram in the northeast.
The exit polls have compounded anxiety among investors, as also Reserve Bank of India Gov. Urjit Patel’s Monday announcement that he would step down. His sudden resignation is expected to lead to volatility in Indian markets in the run-up to the general election.
According to Nomura's Asia 2019 Outlook, the outcome of the vote will be a big focus for investors next year. "A hung verdict in the 2019 elections or a hotchpotch coalition of disparate regional parties represents downside risks to our overall macro view," it read.
The five states have a combined population of over 200 million. Voting took place between Nov. 12 and Dec. 7, and the outcome of the polls is likely to dictate who has the momentum heading into next year.
The BJP has been in power for 15 years in Madhya Pradesh and Chhattisgarh. It ousted the INC in Rajasthan in 2013.
After a number of poor results, however, the INC bounced back in 2017 by winning the northern state of Punjab, where the BJP had been sharing power with an ally. Modi's party just about managed to retain its majority in his home state of Gujarat the same year.