'Horse trading' between the two sides is continuing
A key ally of India's Congress party is leaving the governing coalition because of disagreements over ministerial appointments, officials say.
The Tamil Nadu-based DMK party said its 18 members of parliament would not serve in the government but would still support the coalition in the house.
The move could weaken the government's ability to pass bills, observers say.
The Congress party and its allies swept back to power at the weekend. The new government will be sworn in on Friday.
Analysts say the DMK move will almost certainly not deprive the Congress-led alliance of a majority in parliament - and could be reversed if the DMK wins more ministries.
"Karunanidhi [the chief minister of Tamil Nadu] has asked me to inform you that DMK will only support you from the outside," a letter written by a senior DMK official to the Congress party said.
The DMK's move came as the Congress party tries to gather a coalition of parties ahead of the swearing-in of Prime Minister-elect Manmohan Singh.
The coalition says that it has the support of 274 lawmakers prior to the DMK's announcement, which is two more than needed for a parliamentary majority.
With outside support, the coalition said it had 322 members of the lower house of parliament.
Analysts point out that there is a strong possibility that the DMK is posturing amid the haggling for ministerial portfolios.
They point out that the party made the same move after the 2004 election before eventually joining the ruling alliance - and this time their room for negotiation is weaker because Congress has enough seats of its own and can get others if necessary.
The DMK is reported to be pursuing a repeat of the 2004 formula when for every three MPs, the party got one ministry.
Congress officials say that talks with the DMK are continuing.