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Modi's BJP drops bid to govern Karnataka

NEW DELHI (Reuters) - The Chief Minister of Karnataka, B.S. Yeddyurappa, quit on Saturday after just two days in office, rather than face a confidence vote his minority Bharatiya Janata Party (BJP) was unlikely to win.

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The move could allow the main opposition Congress party, which ruled the state for the past five years, and a regional party to form the government. They have 117 seats in the 225-seat state legislature.

The alliance could galvanise opponents of Indian Prime Minister Narendra Modi ahead of a general election that must be held by May next year.

Some analysts, however, said the Karnataka developments were unlikely to hurt the prospects of Modi’s BJP next year, but investors will be closely watching elections in three other major states this year.

“The impact of the Karnataka political outcome will be short-lived,” said VK Vijayakumar, chief investment strategist at Geojit Financial Services.

“From now on, till elections to Madhya Pradesh, Rajasthan and Chattisgarh later this year, economics will dictate the direction of the market (rather) than politics.”

Newly elected Karnataka lawmakers had been due to hold a “trust” or confidence vote in the assembly on the orders of the Supreme Court, which intervened after the opposition had protested the state governor’s decision to invite the BJP to form a state administration.

Karnataka BJP leader Yeddyurappa, who had been sworn in as the chief minister on Thursday, said he would resign rather than try to prove that he had the support of a majority of the legislators.

The BJP, which rules 21 of India’s 29 states, emerged as the single largest party in Karnataka, but its 104 seats left it short of a majority. Karnataka, home to India’s technology hub of Bengaluru, is the only southern state where the BJP has held power.

In an emotional speech carried live by most Indian TV news channels, Yeddyurappa said his party would now work towards increasing the number of parliamentary seats for the BJP in the state to help Modi’s re-election bid.

Congress chief Rahul Gandhi hailed Yeddyurappa’s decision as a victory.

“I am proud that they have been shown that in India power, corruption and money is not everything but the will of people is everything,” he said in a rare news conference.

Additional reporting by Promit Mukherje and Devidutta Tripathy; Editing by Andrew Bolton and Jon Boyle