UPDATE 5-Voters deal heavy blow to India's next Gandhi

Tue Mar 6, 2012 7:55am EST

* Setback may limit government's room to pursue reform

* Congress heading for loss in at least 3 out of 5 states

* Shadow cast over future of Nehru-Gandhi dynasty

By John Chalmers

NEW DELHI, March 6 (Reuters) - India's Rahul Gandhi failed spectacularly to deliver a promised comeback for his Congress party in crucial state elections, casting fresh doubt on his capacity to become the next member of a storied dynasty to lead the country.

The Congress party flop in India's most politically vital state was also a blow to the already-tottering government of Prime Minister Manmohan Singh, reducing his scope to re-launch reforms and reverse a slowdown in economic growth.

"It has been a disaster for the Congress, it's an even bigger disaster for Rahul Gandhi and the Gandhi family," political analyst Amulya Ganguli said as results came in from Uttar Pradesh and four smaller states that went to the polls.

"They were banking on success in these elections, hoping to get at least four out of five states. It has gone exactly the opposite way. It shows that there is no charisma left in the Gandhi family."

With the count nearing its conclusion on Tuesday, the Congress party was trailing in fourth place in the big northern state of Uttar Pradesh (UP), which with 200 million people would be the world's fifth-most populous country if independent.

It looked set to win about 28 of the state assembly's 403 seats, a marginal improvement on its lacklustre performance there five years ago and far short of the 100-plus tally it had boasted Gandhi's tireless election campaigning would deliver.

"NOT GOOD"

Congress sought to shield Gandhi from blame, arguing it was up to local lawmakers to convert his electioneering into assembly seats. But later, dressed in a long white Indian shirt and smiling in front of a crush of reporters outside the New Delhi residence of his mother, Sonia, Gandhi was humble.

"I accept responsibility for the fact that we did not perform well. After all, I was the main campaigner ... the Congress party fought well, but the result is not good," the 41-year-old Gandhi said.

After speaking to reporters, he walked back to his sister, Priyanka, who put an arm around his shoulders.

There was also mostly disappointing news for Congress from other states that went to the polls over the past month. It was defeated in Punjab and Goa, and neck-and-neck with a rival in Uttarakhand, where counting was still going on. In a small consolation, it won in the far-flung border state of Manipur.

Scion of the Nehru-Gandhi dynasty that has ruled India for most of its 65 years of independence, Gandhi campaigned hard to revive his party in Uttar Pradesh, where it has not ruled for 22 years. He attended more than 200 rallies, slept in villagers' huts and even grew a beard that gave him a more rugged look.

His performance was widely seen as a test of his fitness to take the reins of the party from his ailing Italian-born mother and eventually to become prime minister if Congress and its allies retain power in national elections due in 2014.

However, the runaway winner in Uttar Pradesh was the socialist Samajwadi Party, which means former wrestler Mulayam Singh Yadav will become chief minister for a fourth term since 1989, ousting the flamboyant lower-caste leader Mayawati.

Many remember Yadav for presiding over a surge in gang violence in one of India's most feudal and corrupt states, with his party once counting a "bandit queen" among its lawmakers.

REFORM AGENDA IN DOUBT

However, the Samajwadi Party's image was invigorated by the campaigning of Yadav's fresh-faced son, Akhilesh, who speaks English as well as Hindi, has a postgraduate degree from Sydney and won the state's voters with promises of development.

"Two youthful leaders, both belonging to political families, fighting for their political futures," Oxus Investments Chairman Surjit Bhalla said in a newspaper column, predicting the possible "end of the Nehru-Gandhi dynasty in Indian politics."

"In one corner, Akhilesh Yadav, sounding modern and guaranteeing free computers to the young generation. In another corner, Rahul Gandhi, heir to a 127-year-old heritage, baldly stating that the UP electorate was poor, starving, shirtless, uneducated and without jobs ... The choice is clear."

The party's setbacks may make it harder for Singh's coalition government to pursue reforms that could shore up the country's economic growth, which has slipped below 7 percent.

Battered by a string of corruption scandals and inflation, Singh last year was forced to shelve a flagship reform to open the supermarket sector to foreign direct investment by global retailers such as Wal-Mart, and bills on mining and land acquisition are stuck in the policy queue.

"The results will not provide the political space for the government or the confidence to carry through unpopular reforms," Goldman Sachs said in a note. "We think the best that can be hoped for is muddle-through policies by the government."

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