India's Congress readies for polls amid opposition split

India's embattled ruling Congress party geared up on Monday for next year's elections with a cabinet reshuffle, boosted by a bitter split in the opposition over the elevation of a hardliner.

Four veteran Congress politicians were sworn into the cabinet, as the party readied for a tough battle to try to win a third term in office amid a slew of graft scandals, policy malaise and the slowest economic growth in a decade.

Four other party loyalists were given junior posts in the three-tier ministerial council headed by Prime Minister Manmohan Singh.

Government officials said portfolios of the eight new ministers would be announced later.

A previous railways minister resigned over accusations his nephew took a $160,000 bribe from an official in return for a plum post in the state-run network. His successor also handed in his papers along with the sports minister ahead of Monday's cabinet reshuffle.

"It is a significant rejig as it marks a transition within the party ahead of the polls," author and political analyst Rasheed Kidwai said of the reshuffle.

The move comes a day after the left-leaning Congress unveiled its campaign committee, with members picked from a diverse range of areas throughout the country.

But in a fresh blow to the government, the Reserve Bank of India (RBI) left its key lending rate unchanged, underscoring the challenges it faces as it tries to boost business investment and kickstart the economy.

The RBI held rates steady, saying the local currency's sharp decline could adversely impact already high inflation in Asia's third largest economy.

"The central bank has pushed the ball back into the government's court to boost reforms," said Siddhartha Sanyal, chief India economist with Barclays Capital.

In further concerns about the state of the economy, new figures showed India's trade deficit widening, as imports of gold continued to increase while exports declined.

The government, led by Prime Minister Manmohan Singh, has been dogged by a string of corruption scandals which have derailed efforts to push through promised pro-market reforms, curb the current account deficit and revive the economy.

But Congress has been bolstered by turmoil within the opposition coalition after the pullout of a key partner over the elevation of right-wing hardliner Narendra Modi to head its campaign for the elections due by next May.

The Hindu nationalist Bharatiya Janata Party (BJP) accused its partner, the Janata Dal (United) party, of betrayal over the pullout after a 17-year alliance as the bitterness of the turmoil played out Monday in the Indian media.

"We will take revenge of this insult in the Lok Sabha (Lower House) elections next year," Sushil Kumar Modi, a senior BJP official, was quoted as saying by the Times of India newspaper.

The head of Janata Dal, Nitish Kumar, hit back, telling reporters that Modi's elevation was unacceptable for his party and would prove disastrous at the polls.

"They wish (us) long life but give medicines to kill," Kumar said, referring to new election head Modi.

Modi, who is the chief minister of Gujarat state, was earlier this month named the BJP's election committee chairman, and is likely to be tapped as the candidate for the prime minister's post should the party win elections.

Modi has painted himself as a pro-business reformist who can revive the fortunes of the world's largest democracy.

But he remains a hugely divisive figure nationally after being accused of doing little to stop religious riots in his state in 2002 in which some 2,000 people -- mainly Muslims -- were killed.

Kumar, the chief minister of eastern Bihar state, fears Modi could alienate voters, especially Muslims, not only in this state but nationally, in the election.

But the BJP, which is planning to stage a "Betrayal Day" to protest the pullout, remains firmly behind Modi.

Modi's rise is likely to pit him against Rahul Gandhi, seen as the reluctant scion of the Nehru-Gandhi dynasty, which is at the helm of the Congress party, during the election campaign.

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