NEW DELHI, 28 February 2007 — India’s ruling Congress party suffered a political setback yesterday when it was ousted from power in two northern states, amid mounting voter concern over rising inflation. The defeats in Punjab and Uttarakhand states came one day before the government of Prime Minister Manmohan Singh was to unveil the country’s annual budget.

The state elections are seen as a dress rehearsal for federal elections which must be held by 2009, but Manmohan put up a brave front, saying the vote was not a reflection of disenchantment with his government.

Conceding defeat of Congress party in Punjab and Uttarakhand assembly elections, Manmohan yesterday dismissed apprehensions of the defeats spelling midterm blues for his government.

“There is no question of a referendum against the central government. These elections are part of local elections,” he told reporters. He conceded, however, that rising prices were a problem.

“I think, we will realize all the factors that contributed to this ... I do recognize that inflation is a problem. The government is trying to tackle it as best it can,” Manmohan said.

In Punjab, the national Bharatiya Janata Party (BJP)-led opposition alliance and the regional Shiromani Akali Dal party won 67 of the 117 provincial assembly seats, the Press Trust of India (PTI) reported. Congress bagged 44 seats, while smaller parties won the six remaining seats.

In neighboring Uttarakhand state, Congress conceded defeat to the BJP, which had 34 of the 70 assembly seats — one short of a majority. The Congress won 21, while smaller parties got the rest. Congress was set to hold onto the remote northeastern state of Manipur, where it bagged 29 of the 60 seats, PTI reported.

Congress faces a slew of state elections in the coming months, including in the country’s most populous state of Uttar Pradesh, which is seen as politically pivotal.

Admitting that inflation and anti-incumbency factor may have pushed Congress out of power in both the states, senior party leader Ambika Soni said: “If you have to sustain growth at such high rates, we will have to live with a slightly higher rate of inflation.”

BJP, meanwhile, views the electoral verdict as the “beginning of the end” for the Congress-led government at the center. Confident that the poll results of Punjab and Uttarakhand will help BJP in Uttar Pradesh also, BJP President Rajnath Singh said: “Uttarakhand was once part of UP. And the poll results indicate the public mood and this is a good message for BJP.”

Exploiting the party’s poor performance to question Congress President Sonia Gandhi’s leadership, former External Affairs Minister K. Natwar Singh said: “Sonia Gandhi is no longer an electoral asset for Congress.” While targeting the premier, he said: “He (premier) was so obsessed with nine percent growth that he could not see that the people were upset with massive price rise.”

Analysts too blamed voter concern over high inflation and anti-incumbency factors for Congress’ poor showing. “The Congress, which came to power nationally on the slogan of being with the people of India, seems to have gotten lost with inflation mounting to such levels,” said analyst Rasheed Kidwai.

Punjab Chief Minister Amarinder Singh, who stepped down after it became clear that Congress had lost the election, said inflation had been a factor in the party’s poor showing.

Meanwhile, former Indian cricketer and politician Navjot Singh Sidhu was re-elected to Parliament yesterday, nearly three months after he quit following his conviction for a 1988 road-rage killing.

Sidhu was sentenced to three years in jail in December by a state court but the Supreme Court stayed his conviction and granted him bail last month, allowing him to contest a by-election in Amritsar in the northern state of Punjab. The poll was held on Feb. 13 and votes counted yesterday. Sidhu defeated the ruling Congress party’s candidate, Surinder Singla.

— With input from agencies