Congress party in election defeat

The result is a wake-up call for Congress

India's governing Congress Party has suffered a setback in elections in the northern states of Punjab and Uttaranchal.

It has been defeated by the main opposition BJP and its allies.

The results come a day ahead of the country's annual budget and many believe it translates into voter discontent over rising inflation.

People in the two states also seem to be concerned about a widening gap between the rich and the poor.

Political setback

India's governing coalition led by the Congress Party is half-way through its five-year term.

Security was tight ahead of the vote in Punjab

The BBC's Sanjoy Majumder in Delhi says that the defeats in Punjab, one of the country's main farming belts and the Himalayan state of Uttaranchal represent a major political setback.

While an alliance of the BJP and the Sikh Akali Party has emerged victorious in Punjab, the BJP has also won in Uttaranchal.

Our correspondent says that it is a sign that the opposition is growing in strength.

Take stock

The results come as a new survey showed that India's economy continues to grow at a rapid pace.

But the government is under increasing pressure because of rising inflation - the highest in the past few years - and a slowdown in agriculture, where most Indians are employed.

The Indian Prime Minister, Manmohan Singh, said the poll setback will not have an impact on the functioning of the federal government.

"The elections are fought on local issues," he said.

On the issue of rising prices of essential commodities, the prime minister said the government is trying its best to control inflation.

"The challenge is to control inflation without hurting the growth of the agricultural and industrial economy," he said.

With India poised to face more elections in the next few months, including in the politically-influential state of Uttar Pradesh in April, our correspondent says that the government has nevertheless been forced to take stock.

However, the Congress party seems set to retain power in the north-eastern state of Manipur.

It emerged as the single largest party with 30 out of 60 seats, one seat short of the 31 required to gain an absolute majority in the house.

Congress has been leading a coalition government in Manipur since 2002.

The BBC's north-east Indian correspondent, Subir Bhaumik. say that it is likely to tie up with some of its old allies to remain in power.