By Matthias Williams
NEW DELHI, June 16 (Reuters) - A powerful Indian regional party pulled out of the main opposition alliance on Sunday, a split that could hobble the rise of a controversial Hindu nationalist leader who hopes to oust the ruling Congress party in elections due by May 2014.
The Janata Dal (United) party, based in the eastern state of Bihar, announced it would end a 17-year-old alliance with the Bharatiya Janata Party (BJP) after the BJP promoted firebrand leader Narendra Modi to lead its election campaign.
The exit could hamper the chances of the Hindu nationalist BJP finding enough allies to mount a convincing challenge to Prime Minister Manmohan Singh's administration, whose second term has been plagued by scandals and a worsening economy.
It could also encourage a rag-tag of regional parties - with fickle leaders and diverse local agendas - to form their own so-called third front coalition, which, if they were successful, could present a risk for Asia's third-largest economy.
Nitish Kumar, the chief minister of Bihar state and a senior JD(U) party leader, announced the break with the BJP at a news conference.
"BJP is going through a new phase. We are not in agreement with that. We cannot compromise with our basic principles," Kumar said.
The BJP chose Modi to lead its election campaign on Sunday last week, a position that would in all likelihood make him the party's candidate for prime minister. But his selection has exposed rifts within the BJP and the broad opposition alliance.
Modi is one of India's most popular leaders, who has won praise from voters and business leaders for economic growth in the state of Gujarat under his stewardship as chief minister.
But many people see him as too divisive to lead the country.
Critics say he did too little to stop, or even quietly encouraged, religious riots in his state in 2002 that killed at least 1,000 people, most of them Muslims - an accusation he denies.
Kumar's vote base includes a significant number of Muslims, which could have made it difficult for him to throw his full support behind an alliance headed by Modi.
A BJP spokesman and other critics said Kumar's decision to leave the opposition was opportunistic.
Kumar did not announce any political plans but there has been speculation he could join an alliance led by the prime minister's ruling Congress party.
The general election could pit Modi against Rahul Gandhi, son of Congress party chief Sonia Gandhi and the scion of India's most powerful political dynasty. (Additional reporting by Shashank Chouhan; Editing by Robert Birsel)