India's ruling Congress-led coalition was leading in the key state of West Bengal, ruled by communists for more than three decades, as votes from state elections were counted on Friday.
A good showing for Congress may restore some lost political authority for Prime Minister Manmohan Singh after the country's worst ever corruption scandal has paralysed the government for months and hit foreign investment in Asia's third largest economy.
The vote may define how aggressively the government moves ahead with long-awaited reforms such as raising fuel prices and a land acquisition bill for farmers.
The Congress alliance was leading in 163 seats out of the 294 seats at stake in the West Bengal state assembly, with the communists ahead in 65 seats, TV stations said.
But the coalition may lose in the national swing state of Tamil Nadu after its regional ally, the DMK, became embroiled in the telecoms graft case that may have cost the government up to $39 billion.
The results from the five states where the elections were held will be known by around noon (0630 GMT).
"This is an election of national significance, because it shows you that corruption does not go unpunished," said Shekhar Gupta, Editor-in-Chief of the Indian Express newspaper."
There is talk of a cabinet reshuffle after the election and a push by the government to pass bills in the July parliamentary session, including one to help industry acquire land from farmers.
With neither of the main national parties, Congress and Hindu nationalist opposition Bharatiya Janata Party (BJP), able to secure majorities in general elections, electoral power in India comes down to forging coalitions with regional allies.
The results will take the political temperature in states that jointly make up a fifth of the 545-strong lower house of parliament and will help redraw the political map ahead of federal elections in 2014.
West Bengal sends 42 lawmakers to parliament and its long domination by the communists is one of the biggest reasons India's founding socialist ideas retain political currency even after two decades of market reforms.
The likely victory of Singh's ally, maverick populist Mamata Banerjee of the Trinamool party in West Bengal, may force the ruling Congress party to depend on an unpredictable parliamentary partner opposed to several economic reforms.
Analysts say Banerjee's victory there could give her a louder voice when the government considers raising fuel prices or cutting down on subsidies -- measures that are key to keeping the fiscal deficit at the targeted 4.6 percent of GDP in 2011/12, when slowing economic growth may see a sluggish tax intake.
As the federal railway minister, Banerjee has kept fares untouched and expanded freebies. She has several times forced a deferral of decisions on raising fuel prices. Her party is also against more foreign investment in insurance.
Singh's government has been considering lifting controls on diesel and fertiliser prices and streamlining a bloated food subsidy programme, but these measures are politically unpalatable given inflation is at nearly 9 percent.
Rising tax revenue from an economy powering away at close to 9 percent has long let India avoid taking hard decisions on slashing expenditure, including subsidies on food, fuel and fertilisers that supporters say are needed to protect India's half-a-billion mostly rural poor from inflation.
But growth this year is expected to slow down to 8.5 percent, weighed down by the nine rate hikes since last March effected to curb inflation.
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