By Sanjeev Miglani
NEW DELHI (Reuters) - India's Prime Minister Manmohan Singh's left-of-centre coalition appeared to be heading for a second term after a clear victory in the general election, TV networks projected as votes were counted on Saturday.
Singh's Congress-led coalition was beating the main Hindu nationalist opposition alliance led by the Bharatiya Janata Party (BJP) but was still short of a majority, meaning it would have to cobble together a coalition with smaller parties.
The Congress party-led coalition was projected to win 243 to 250 seats, short of the 272 seats needed for a parliamentary majority, according to NDTV. Other TV stations had similar forecasts.
If confirmed, the result would be better than expected for Congress and could boost investor confidence and hopes for reforms. Markets had been jittery over a poor showing by either national alliance, fearing the emergence of a weak coalition.
"The results are pleasantly surprising, we were not so confident at the beginning but now we are very confident and we will secure a majority," Congress leader Oscar Fernandez said.
Congress party supporters, their arms in the air and carrying banners of star campaigners Rahul and Priyanka Gandhi, set off firecrackers in celebration in New Delhi on news of the early election returns.
A strong showing by Singh's coalition would leave it less vulnerable to pressure from other parties including the communists who had walked out last year over a nuclear deal with the United States.
The communists were trailing in the election including in the bastion state of West Bengal which they have ruled for more than three decades, early projections said.
"So if you want to project from this, it looks like Congress will not only emerge as the single largest party but will be comfortably ahead," Vinod Mehta, editor of Outlook magazine, said.
India's booming economic growth for the past four years, including rising rural incomes, may well have worked for the Congress-led coalition headed by the reformist Singh.
A severe financial downturn that began last year and is continuing in Asia's third largest economy appeared to have had little impact on the fortunes of the ruling alliance.
"It seems to me that we must acknowledge the economy," said political analyst Mahesh Rangarajan. "Despite the slowdown in the economy in the last year, these four or five years have been among the best in India's recorded economic history."
But the BJP said it was still too early to call the election. "The trends are out, not the results," BJP leader Venkaiah Naidu told Times Now TV channel. "I do concede Congress seems to be having a clear upper hand as of now."
Computerised counting of votes at hundreds of centres across the country began at 3:30 a.m. British time with the results for all parliamentary seats due later in the day
BACKROOM DEALS
Despite the Congress gains, analysts said days of backroom dealings may still lie ahead before a new government is in place with supporting groups seeking their pound of flesh.
India is faced with its slowest economic growth in six years and instability in Pakistan that some fear may eventually spill into the country.
Any new government will have to tackle the question of ties with Pakistan that have been in deep-freeze since an attack on Mumbai by Pakistan-based militants last November.
Both the Congress and the BJP have taken broadly similar positions on Pakistan, with neither willing to give much ground until they are convinced Islamabad has prosecuted those behind the attack.
Since then the Pakistan Army, prodded by the United States, has launched an offensive against Taliban militants in the Swat valley.
The United States, which considers India to be a key part of its regional strategy to fight Islamist militants in both Afghanistan and Pakistan, is expected to lean on New Delhi to begin talks with Pakistan to help stabilise the region.
About 714 million people were eligible to vote in the largest such exercise in the world staggered over a month to allow security forces and election officials to supervise.
(Additional reporting by Reuters reporters; Editing by Alistair Scrutton)