By Rupam Jain Nair and Douglas Busvine
NEW DELHI (Reuters) - Indian Prime Minister Narendra Modi will have to reverse course and engage with opposition leaders if he is to salvage his economic reform program, senior aides said on Monday, after he suffered a humiliating state election defeat.
Modi's nationalist Bharatiya Janata Party (BJP) was hammered in Bihar by a regional alliance, even though the 65-year-old leader addressed more than 30 rallies across the poor eastern state of 104 million people.
The setback destroys any hopes Modi might have had of securing control of parliament's upper house in this five-year term, barely 18 months after he won India's strongest national mandate in three decades.
"It's going to make his life really difficult - he will struggle to form a majority in the upper house," said Shilan Shah, an economist at Capital Economics. "The next step is to put aside some of the really polarizing issues and form alliances."
At a meeting after Sunday's Bihar results, in which Chief Minister Nitish Kumar's "grand alliance" won 178 seats to 58 for the BJP and its allies, close aides urged Modi to reach out to opposition heavyweights he has until now shunned.
"There is a realization that he will have to negotiate," one senior adviser said, requesting anonymity due to the sensitivity of the matter.
It remains to be seen whether Modi follows his aides' advice. Since storming to power, he has made a point of trying to crush the ousted Congress party and the Nehru-Gandhi dynasty that leads it.
He has not met party president Sonia Gandhi, even though Congress successfully blocked legislation during the last parliamentary session and frustrated several of Modi's key reforms. This is now likely to change, the adviser noted.
Signature policies, above all the biggest tax reform since independence in 1947, are at stake.
If Modi is to make headway, aides say he will have to wean himself off the company of friends from his home state of Gujarat, which he ran for over a decade, and the Rashtriya Swayamsevak Sangh (RSS), the Hindu movement that is the BJP's ideological parent and moulded him as a politician.
"If they don't manage to get that consensus, we won't have sustained and stable reforms," said M.R. Madhavan, president of PRS Legislative Research and a leading observer of parliamentary politics.
Also under critical scrutiny is the polarizing campaign strategy of BJP president Amit Shah, who irked many by saying firecrackers would go off in Pakistan if the BJP lost in Bihar.
The jibe appeared to be intended to mobilize the party's core Hindu support base against Muslim-majority Pakistan, India's arch rival.
It was Shah, an old friend from Gujarat, who scripted the BJP's Bihar strategy exclusively around Modi: the party did not put up a candidate for the post of chief minister.
"We should have projected a local face as our chief ministerial candidate," one regional BJP leader told Reuters, adding that the party should have done a better job of pitching its message of development and steered clear of controversy.
Criticism has rained down on Modi and Shah for trying to turn Bihar into a referendum on the prime minister's leadership, leaving him vulnerable to a strong campaign by Kumar and ally Lalu Prasad that addressed voter concerns in a state riven by complex divisions of caste and religion.
"The BJP will hopefully learn the lesson that communal politics does not yield returns in the long run. But it is not going to be easy," political analyst Pratap Bhanu Mehta wrote in the Indian Express.
Two days before his party crashed to defeat, Modi hosted RSS leader Mohan Bhagwat for lunch at his residence.
One source familiar with their table talk said Bhagwat asked whether Modi wanted to carry on as a campaigning prime minister or instead focus single mindedly on running the country.
HYPE AND REALITY
As Modi prepares to visit Britain, where he is due on Friday to address a sellout crowd at London's Wembley Stadium, the gulf that has opened between expectation and achievement has widened.
On his return, Modi will be reminded that acquiring 15.9 million Twitter followers is easier than getting reforms through parliament, which convenes for its winter session on Nov. 26.
One senior leader of the Congress party, which also made gains in Bihar, said the opposition would not drop its blockade unless the BJP renounced its divisive policies.
These include bans in BJP-ruled states on eating beef and the slaughter of cows that are sacred to many Hindus, but whose meat is eaten by minority Muslims and others in multi-faith India.
"We will forcefully raise ... Prime Minister Modi's silence over issues of beef eating and growing intolerance," said the Congress leader, a former cabinet minister.
(Additional reporting by Manoj Kumar and Mayank Bhardwaj; Writing by Douglas Busvine; Editing by Mike Collett-White)