Victory for Modi's Bharatiya Janata Party in Uttar Pradesh would boost his chances of winning the 2019 general election.
Early counting on Saturday in India's most populous state showed Prime Minister Narendra Modi's party leading in the country's most important electoral test since the 2014 general election.
Victory for Modi's Bharatiya Janata Party (BJP) in Uttar Pradesh, which is home to 220 million people, would boost his chances of winning the 2019 general election and underscore his popularity after he made himself the face of the party's campaign.
The prime minister would also see success as vindication of his sudden decision in November to abolish high-denomination banknotes to rein in corruption.
The move was seen as politically risky, because most transactions in India are carried out in cash and millions of Indians were forced to join long queues outside banks to deposit their old bills or get hold of new ones.
Though it was premature to call the outcome, the election commission put the BJP leading in 262 of the 403 seats in the state, putting it on course for a large majority.
The BJP's vote share based on early counting is more than 40 percent, the election commission said.
Having campaigned in the state for two months, Modi, and his election strategist Amit Shah, can take credit if the BJP wins - but may face a backlash from sidelined party elders if they come up short.
"The results will redefine the prime minister's political destiny and his future course of action," an aide to Modi in the capital, New Delhi, told Reuters news agency.
Post-election surveys had suggested Modi's BJP had done enough to come first in Uttar Pradesh, home to one in six Indians, but that it might fall short of an outright majority.
The exit polls, which are often wrong in India, also put the BJP ahead in three of four other states that will declare election outcomes on Saturday.
According to early voting trends, opposition Congress party was leading in the state of Punjab, while the BJP was ahead in the northern state of Uttarakhand and in the coastal state of Goa.
Results of a ballot in a fifth state, Manipur, were also due on Saturday.
The BJP's opponents include an alliance between Congress and the ruling Samajwadi Party, a tie-up that caught Modi's party off guard. A better than expected showing by a third party could complicate the picture as results filter out.
A strong BJP showing would be welcomed by investors counting on further economic reforms - including the launch of a national sales tax - in the absence of any credible opponent who might halt Modi's march to a second term in 2019.
Short of a majority, the BJP could see opponents block its path to power in the state by forming a coalition, although Modi's party will also look to convince its smaller rivals to join forces.
"If the BJP fails to secure a majority, then Modi's economic decisions will be questioned and his failure to create jobs will impact his political future," said Mohan Guruswamy, who heads the Centre for Policy Alternatives, an independent think-tank.
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