* Government agrees to anti-graft demands
* Social activist will end fast on 13th day
* Blow for ruling Congress party ahead of polls
By Arup Roychoudhury and Annie Banerji
NEW DELHI, Aug 27 (Reuters) - A self-styled Gandhian activist whose campaign against corruption sparked some of India's biggest anti-government protests in decades will end a 13-day hunger strike on Sunday after Prime Minister Manmohan Singh caved in to his demands.
The 74-year-old Anna Hazare has tapped a groundswell of public anger against endemic corruption, uniting the country's bulging middle-class against a hapless political class and underlining voter anger at Singh and the ruling Congress party.
India's parliament on Saturday backed landmark anti-corruption legislation, meeting Hazare's key demands. Tens of thousands of mostly urban and wired voters across India will claim victory in an unprecedented movement that may usher in a new force in Indian politics and hit the ruling Congress party hard in crucial state elections next year.
"I feel this is the country's victory ... Tomorrow at 10 am I want to publicly break my fast," Hazare told over tens of thousands of cheering supporters on Saturday evening at a protest site in New Delhi that has become the epicentre of a nationwide crusade.
"Only half of the battle has been won, there is still some of it left," a weak-looking Hazare told the crowd.
Hazare and his team of social activist aides led a rousing rendition of the Indian national anthem as supporters waved national flags and celebrated almost a fortnight of protest.
The veteran activist, whose health had seriously deteriorated as his weight fell, made the announcement after a specially-convened session of parliament ended with lawmakers backing a resolution by Finance Minister Pranab Mukherjee to push for a law to create an independent ombudsman with wide-ranging power to investigate lawmakers, the judiciary and bureaucrats.
Undermined by graft scandals and seen as out-of-touch with voters battling high inflation, Congress' failure to deal with Hazare's campaign before it became a national issue spells danger for the ruling party in state polls next year ahead of the 2014 general election.
While protests in India are not uncommon, the sight of many well-off young professionals using Twitter and Facebook taking to the streets of Asia' third-largest economy suggest an awakening of a previously politically-ambivalent middle-class.
Mukherjee on Saturday said parliament agreed to demands from Hazare to bring civil servants under the proposed agency's authority alongside parliament and the judiciary, ensure similar agencies at a state level and create a citizen's charter.
"We are at a crossroads, let us try to find a solution within the constitutional framework without violating the supremacy of Parliament," Mukherjee told the lower house.
Support for Mukherjee's resolution came after a gruelling day of fractious debate in both chambers that highlighted just how much Hazare's campaign and the public support for it had rocked India's political establishment.
Hazare's trademark white cap has been sported by thousands of protesters across the country, and the slogan "I am Anna" has become a rallying cry for a generation of young people disillusioned by their graft-stained politicians.
Hazare is not some out-of-the-blue phenomenon, however. Deep-seated change has been underway for years in India as its once-statist economy globalises, bolstered by a widely used freedom of information act, aggressive private media and the election of state politicians who have rejected traditional caste-support bases to win on governance issues.
After a botched arrest as part of a hardline approach to Hazare, a government U-turn saw ministers praise the activist, suggesting a leadership deficit in Congress without party head Sonia Gandhi, who is recovering after surgery for an undisclosed condition.
Congress pledged a slew of economic reforms after winning re-election in 2009 that would have made foreign investment easier and tax collection more effective. But graft and anger over inflation has stymied attempts to debate the legislation.
Transparency International rates India in 87th place on the most corrupt countries, according to a 2010 survey.
Several scandals linked to the government, including a bribery scam involving the granting of telecom licences that led to the arrest of a telecoms minister and may have cost the state up to $39 billion in lost revenues, led to Hazare's latest protest.
Congress has staked a large amount of political capital on victory in next year's state election in Uttar Pradesh, India's most populous state, where a disappointing result would ring serious alarm bells for the federal ballot in 2014.
Hazare became the unlikely thorn in the side of the government when he went on hunger strike in April. He called off that fast after the government promised to introduce a bill creating an anti-corruption ombudsman.
The so-called Lokpal legislation was presented in early August, but activists slammed the draft version as toothless because the prime minister and judges were exempt from probes. (Writing by Henry Foy; Editing by Paul de Bendern)
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