A key regional ally pulled out of India's ruling coalition on Tuesday in protest against the government's position on a U.S.-backed United Nations resolution on war crimes carried out during Sri Lanka's civil war.
The Dravida Munnetra Kazhagam (DMK) is based in the southern state of Tamil Nadu, and has often pressured the Indian government to do more to protect Sri Lanka's minority Tamil population. It wants the Indian government to introduce stronger language into the resolution, including the use of the word "genocide". The government has yet to give a response on what its position on the resolution would be.
The DMK has 18 seats in the lower of house of parliament that had been part of Prime Minister Manmohan Singh's coalition, which already rules in a minority. Singh's Congress party can continue to govern with parliamentary support from two other regional parties.
Finance Minister P. Chidambaram said the government was stable.
But the DMK's withdrawal will make life harder for the government, which will now be even more at the mercy of smaller parties which are skeptical of economic reforms aimed at reviving stuttering growth in Asia's third-largest economy.
It also heightens the chance that the government, which is due to hold national polls by the middle of 2014, could call a snap election if it is unable to push through any legislation.
The DMK leader, M. Karunanidhi, told a press conference the party would not offer outside support to the government and would withdraw its five ministers on Tuesday or Wednesday.
Indian bonds, stocks and the rupee fell on the news.
The government needs 271 seats out of 543 to survive any possible confidence vote. After the pullout of the DMK, the Congress alliance has about 235 seats, but they could narrowly survive any vote with the outside support of other parties.