Indian PM Modi's party ahead in state polls

Early counting on Saturday in India's most populous state showed Prime Minister Narendra Modi's party leading in the country's most important electoral test since the 2014 general election.

If the Bharatiya Janata Party does wrest control of Uttar Pradesh it would be an endorsement of Modi's stewardship of Asia's third-largest economy after his high-risk decision last November to scrap high-value banknotes worth 86% of the cash in circulation.

Though it was premature to call the outcome, the election commission put the BJP leading in 262 of the 403 seats in the state, putting it on course for a large majority.

The BJP's vote share based on early counting is more than 40%, the election commission said.

"This will be a phenomenal endorsement for Narendra Modi and will put him on track for winning the 2019 election," Prannoy Roy, editor of TV channel NDTV said.

Having campaigned in the state for two months, Modi, and his election strategist Amit Shah, can take credit if the BJP wins - but may face a backlash from sidelined party elders if they come up short.

"The results will redefine the prime minister's political destiny and his future course of action," an aide to Modi said.

Post-election surveys had suggested Modi's BJP had done enough to come first in Uttar Pradesh, home to one in six Indians, but that it might fall short of an outright majority.

The exit polls, which are often wrong in India, also put the BJP ahead in three of four other states that will declare election outcomes on Saturday.

According to early voting trends, opposition Congress party was leading in the state of Punjab, while the BJP was ahead in the northern state of Uttarakhand and in the coastal state of Goa. Results of a ballot in a fifth state, Manipur, were also due on Saturday.

Investors watching

Voting in Uttar Pradesh, a state of 220 million people, was conducted in seven stages and ended on Thursday.

The BJP's opponents include an alliance between Congress and the ruling Samajwadi Party, a tie-up that caught Modi's party off guard. A better than expected showing by a third party could complicate the picture as results filter out.

A strong BJP showing would be welcomed by investors counting on further economic reforms - including the launch of a national sales tax - in the absence of any credible opponent who might halt Modi's march to a second term in 2019.

Short of a majority, the BJP could see opponents block its path to power in the state by forming a coalition, although Modi's party will also look to convince its smaller rivals to join forces.

"If the BJP fails to secure a majority, then Modi's economic decisions will be questioned and his failure to create jobs will impact his political future," said Mohan Guruswamy, who heads the Centre for Policy Alternatives, an independent think-tank.