By Rupam Jain Nair and Andrew MacAskill
NEW DELHI (Reuters) - Indian Prime Minister Narendra Modi met leaders of his party on Monday to discuss whether to overhaul policies and priorities in the wake of a humiliating defeat in elections in the eastern state of Bihar.
Modi and a dozen senior colleagues of his Hindu nationalist party, including its president Amit Shah, Finance Minister Arun Jaitley and Home Minister Rajnath Singh, gathered at the party's offices to analyze the reasons for the defeat."There are lessons to be learnt," Jaitley told reporters after the meeting, without outlining specifics. "In elections you win some and lose some."
Sunday's loss in Bihar, India's third most populous and poorest state, is the most significant setback for Modi since he won a crushing victory in a general election last year.
For the first time since he came to power, party leaders are openly starting to question the direction of the government.
The Bharatiya Janata Party (BJP) office in New Delhi was virtually deserted on Monday, with only a few workers compiling newspaper clippings on the election defeat.
Indian shares, bonds and the rupee opened at six-week lows as investors who had backed Modi worried he would struggle to push economic reforms through parliament against an emboldened opposition. They later regained their footing.
PARLIAMENTARY SETBACKThe Bihar loss may hamper Modi's reform agenda because he needs to win most state elections in the next three years to gain full control of parliament. India's states are represented in the upper house, where the BJP lacks a majority.The government announced on Monday that parliament will resume for the winter session on Nov. 26. Over the last year, Modi has struggled to pass laws, including tax and labor reforms, and now faces an opposition with political momentum.
The election came against a backdrop of concerns in India over incidents in which Muslims have been targeted by Hindu zealots. There have been protests by prominent intellectuals at what they call a climate of rising intolerance.Some BJP lawmakers called for the party to promote a more unifying agenda focusing on economic development, after a campaign in Bihar that sought to polarize voters along caste and religious lines."We have to be single mindedly focused on development, development, development," said Chandan Mitra, a BJP member of parliament. "We can't afford to be distracted by anything else."
A senior BJP leader, who asked not to be named, said the problem was that Modi sidelined too many people.
"Modi thinks he can do it all at once. He wants economic growth, social and cultural revolution, to win political battles and project himself as a statesman," he said.
"If he wins then every voice of dissent can be silenced, but if he fails then every voice of dissent is going to build."
AGGRESSIVE TACTICSThe election was one of the most vicious in recent years.
At one of dozens of election rallies addressed by Modi, he accused rival parties of snatching economic benefits from lower-caste Hindus and handing them over to a religious minority, a comment interpreted as a veiled reference to Muslims.The election commission banned several party posters they said could incite hatred. One banned poster showed a young Hindu woman embracing a garlanded cow, an animal sacred to Hindus. The BJP president was also criticized for comments suggesting that if his party lost, the result would be celebrated in arch-rival Pakistan.
In contrast, Chief Minister Nitish Kumar, who led the anti-Modi alliance in Bihar, was able to trade on his record of turning around a state that was once widely considered to be among India's most corrupt and lawless.
Arun Shourie, a minister in the last BJP government, called for a change in course."We should be grateful to the people of Bihar because the direction has been halted," he told NDTV news. Asked what went wrong with the party's Bihar campaign, he said: "Everything".
(Editing by Mike Collett-White)