(Corrects headline to make clear Modi heads party's election campaign)
* Several BJP leaders stayed away from meeting
* Party has little support in key Indian states
* Modi praised for business-friendly Gujarat
* Rahul Gandhi could be main Congress party rival
By Anurag Kotoky
NEW DELHI, June 9 (Reuters) - Acrimony over the selection on Sunday of Narendra Modi to head the opposition's campaign in India's coming election exposed rifts within his Hindu nationalist party.
Several senior leaders of the Bharatiya Janata Party (BJP) stayed away from the meeting at which Modi was appointed as standard-bearer for elections due by next May, a position that could make him the party's candidate for Prime Minister.
Under India's parliamentary system, parties do not always formally announce a candidate before a general election but usually project one figure as the likely person to form the government should the party win.
"It's broadly analogous to a primary in a U.S. political party. It will clearly establish Modi as first among equals in the BJP," Sadanand Dhume, of Washington-based think-tank the American Enterprise Institute, told Reuters.
"This doesn't mean that critics in his own party disappear, but it does mean that Modi's political fate will now be in the hands of voters rather than party political bosses."
Despite the endorsement of his party, Modi's ambition of becoming Prime Minister will be hard to realise.
This is partly because he is such a polarising figure. Modi is popular among voters who are tired of what they consider to be incompetent and corrupt governments and see him as a no-nonsense administrator who can deliver growth and development, but he is viewed with deep suspicion by others, particularly the large Muslim minority.
Many within the BJP, including party veterans whose absence from the Goa meeting became a media sensation, fear that he is too divisive to lead the party back to power after nearly a decade in opposition.
His biggest hurdle, however, will be winning enough parliamentary seats for the BJP to lead a coalition government. The party has little support in many key states.
Modi, 63, has struggled to shake off criticism that he did not do enough to prevent religious rioting in 2002 that killed at least 1,000 people - most of them Muslims - in the western state of Gujarat, where he is chief minister. Modi denies any role in the killings or any negligence during the unrest.
However, industrialists openly praise him for making Gujarat a business-friendly state. Oil and gas major Reliance Industries and carmakers Ford and Tata Motors have invested billions of dollars in the region.
Western nations, which snubbed Modi for years after the 2002 violence, have also begun to engage with a man whose state offers lucrative business opportunities.
If Modi does make a tilt at the premiership, he could come up against Rahul Gandhi, the heir of the Nehru-Gandhi dynasty who was recently made vice president of the ruling Congress party.
The Congress party, which has led a coalition government since 2004, is mired in corruption scandals and is widely blamed for the country's slowest economic growth in a decade.
However, even if the Congress party lands enough seats to lead the next government, Gandhi may stand aside for someone else to become Prime Minister, preferring to wield power from behind the scenes, as his mother Sonia Gandhi does now.
But success for the Congress party is by no means certain.
"We will leave no stone unturned for an India free of the Congress party," Modi wrote on Twitter after his selection to lead the BJP campaign.
(Editing by John Chalmers and David Goodman)