May 16 (Bloomberg) -- Prime Minister Manmohan Singh’s Congress party and the opposition Bharatiya Janata Party are running neck-and-neck in early counting in India’s elections, throwing open the race to lead the world’s biggest democracy.

Congress is ahead in 60 seats of 176 where counting has started, according to NDTV 24x7 news channel. The BJP led in 52 constituencies. Officials began counting about 430 million votes at 8 a.m. local time after general elections ended May 13.

Exit polls predicted Congress may emerge as the single largest party, though it may have to find new allies to reach the 272-seat lower-house majority in parliament. Trade Minister Kamal Nath said May 14 that Congress is trying to retain power without the help of communist parties, its biggest ally until last year. Communists oppose a greater role for foreign investment and almost brought down Singh’s government last year over a nuclear energy deal with the U.S.

“A lot of political drama will unfold in the coming days and it will become a war of nerves,” said Yashwant Deshmukh, head of the New Delhi-based C-Voter polling agency. “Political parties will be busy working out all possible permutations to form their respective governments and will go hunting for allies.”

The computerized count follows five weeks of voting at 834,000 polling stations from the Himalayas to tropical islands in the Bay of Bengal. As many as eight million people, half of them security personnel, ran and guarded the election.

President’s Role

“The scale of our electoral exercise is really mind- boggling,” S. Y. Quraishi, one of three election commissioners, said in an interview yesterday.

President Pratibha Devisingh Patil, a Congress nominee, may ask the largest party or strongest alliance to form a government. The new government must be in place by June 2, when the term of the current lower house ends.

The Third Front, a loose grouping of smaller parties including the communists, is leading in 32 seats, according to NDTV 24X7. Congress and the BJP may offer ministerial posts to attract lawmakers to get a majority and avoid a repeat of a BJP government that lasted just 13 days in office in 1996 because it wasn’t able to gather enough support.

India’s stocks, currency and bonds may decline unless a stable government emerges in short order. After the 2004 elections, the benchmark Sensitive Index plunged 11 percent in one day as investors feared that communist allies in the new government would slow the pace of reforms.

Lal Krishna Advani, 81, is the BJP’s candidate for prime minister.

Potential Powerbrokers

Among possible kingmakers this time around are Jayalalitha and Mayawati, who are predicted to make gains in the states of Tamil Nadu and Uttar Pradesh.

Mayawati, the 53-year-old chief minister of India’s most- populous state, is bidding to build a national base with the support of those at the bottom of the caste hierarchy, known as dalits. Jayalalitha, 61, is a former actress who brought down a BJP government a decade ago and is seeking to recover from winning no seats in 2004.

Congress, the party that has produced three prime ministers for the Nehru-Gandhi family, won 145 seats in 2004. The BJP, which built itself into a national power from the late 1980s with a campaign to construct a Hindu temple on the site of an ancient mosque, was ousted in 2004, when it won only 138 seats.

The BJP has accused Congress of being soft on terrorism following the attack and a series of bombings in major cities.

The U.S. wants Indian help in its fight against Islamic militancy in the region, especially Pakistan. Prime Minister Singh stalled a peace process with India’s nuclear-armed neighbor following last November’s terrorist attacks in Mumbai.

To contact the reporters on this story: Subramaniam Sharma in New Delhi at ssharma@bloomberg.net; Bibhudatta Pradhan in New Delhi at bpradhan@bloomberg.net

Last Updated: May 15, 2009 23:46 EDT