NEW DELHI (Reuters) - The Congress party trailed in fourth place as vote counting neared its end in Uttar Pradesh on Tuesday, a bitter election blow to Rahul Gandhi who had staked his political future on reviving his party's fortunes in the state.
Gandhi, scion of the Nehru-Gandhi dynasty that has ruled India for most of its 65 years of independence, had campaigned tirelessly to revive his centre-left party in a politically crucial state where it has not held power for 22 years.
The campaign, which thrust him into the rough and tumble of the state's politics, where he even slept in villagers' huts, was seen as a test of his fitness to take over from Prime Minister Manmohan Singh after general elections due in 2014.
Instead, the leftist Samajwadi Party (SP) looked set to win the largest number of seats in Uttar Pradesh, a politically important state that with 200 million people has a larger population than Brazil.
Congress also looked set to lose in the state of Punjab but was leading the seat count in Uttarakhand, Manipur and Goa.
"It has been a disaster for the Congress, it's an even bigger disaster for Rahul Gandhi and the Gandhi family," said political analyst Amulya Ganguli.
"They were banking on success in these elections, hoping to get at least four out of five states. It has gone exactly the opposite way. It shows that there is no charisma left in the Gandhi family."
The party's setbacks in Uttar Pradesh and Punjab could make it harder for Singh's already weakened coalition government to pursue reforms that could shore up the country's economic growth, which has slipped below 7 percent.
Battered by a string of corruption scandals and inflation, Singh last year was forced to shelve a flagship reform to open the supermarket sector to foreign direct investment (FDI) by retailers such as Wal-Mart (WMT.N), in the face of political protests.
"Following the state assembly election results, the unpopular reforms might be postponed to some extent like FDI in retail and the deregulation of diesel prices," said N.R. Bhanumurthy, an economist at the National Institute of Public Finance and Policy, a Delhi-based think tank.
"It breaks the confidence of the government," he said.
With partial results in for 386 of the 403 assembly seats in Uttar Pradesh, Congress and a regional ally were leading in just 38, according to the Election Commission.
Congress, which heads the central coalition government, won only 22 of the state's seats in the last poll.
This could mean a return to power for Mulayam Singh Yadav, a former wrestler who first governed Uttar Pradesh from 1989, when Rahul's father, Rajiv, was still alive. However, Yadav's party looked set to fall short of an absolute majority, and so it may seek a coalition with Congress to rule the state.
Congress spokesman Abhishek Manu Singhvi defended Gandhi's electioneering despite the disappointing results.
"Not even Rahul Gandhi's worst enemies, political or otherwise, suggest that his leadership was lacking. He was outstanding," he said. "He's gone to every nook and cranny, he's provided the spirit, the euphoria, the leadership - if it doesn't translate, then it doesn't translate."
Writing by John Chalmers; Reporting by Annie Banerji, Arup Roychoudhury, Manoj Kumar and Matthias Williams; Editing by Robert Birsel