* Opposition boycott means fewer than half of districts are being contested
* Early voter turnout appears light
* Impasse between two dominant parties fuels worries of economic stagnation (Updates with details from polls, comments)
By Serajul Quadir and Nandita Bose
DHAKA, Jan 5 (Reuters) - Voters in Bangladesh cast ballots in modest numbers amid heavy security on Sunday in parliamentary elections boycotted by the main opposition, marred by deadly violence and shunned by international observers as flawed.
Election officials acknowledged that early turnout was low.
With fewer than half of the 300 parliamentary seats being contested, the ruling Awami League was poised for a walkover victory.
Seven people were killed in separate incidents on election day and voting was halted at more than 100 polling stations. More than 130 sites were set ablaze ahead of the vote and fear of violence was expected to keep many voters away, with much of the unrest in rural areas.
The impasse between the two main parties, which shows no sign of easing, undermines the poll's legitimacy and is fuelling worries of economic stagnation and further violence in the impoverished South Asian nation of 160 million.
"We want to vote so that this phase of continuous violence ends," said Mulaha Begum, 40, a Dhaka housewife.
The country's $22 billion garment industry, which accounts for 80 percent of exports, has been disrupted by transportation blockades ahead of the election.
Either Prime Minister Sheikh Hasina or Bangladesh Nationalist Party (BNP) chief Begum Khaleda Zia has been prime minister for all but two of the past 22 years. The two are bitter rivals.
"The elections will resolve nothing," said Ataur Rahman, a political science professor at Dhaka University.
"Things will stay exactly the way they are because both the leaders will continue to avoid a meaningful dialogue with each other, and that's the only thing that can bring this crisis to an end."
PM PROPOSES TALKS ON FUTURE ELECTIONS
Hasina has spoken of holding talks with the opposition following the polls on the conduct of future elections, which, if successful, could lead to another election. The BNP demands a halt to the current electoral process.
Although turnout figures were unavailable, voting appeared slow at several polling stations in the capital.
"One party did not participate in the elections and because of this the turnout was expected to be low," Chief Election Commissioner Kazi Rakibuddin Ahmad told reporters. "We are hoping as the day progresses the turnout will improve."
At a site in the Monipuri Para area, just 28 votes had been cast out of 3,019 registered voters 3 1/2 hours into polling.
Voting was brisker in another neighbourhood, where hundreds crowded around clearly overwhelmed officials.
The BNP said the low numbers vindicated its denunciation of the poll as a farce.
"The turnout is a clear indication that the common people rejected this election and it is almost an election without voters," Shamsher Mobin Chowdhury, a BNP vice chairman, told Reuters.
Junior Law Minister Mohammad Quamrul Islam said polling was generally proceeding peacefully. He said the election was necessary for the democratic process and repeated that another poll could be held anytime in agreement with the BNP.
"But they must stop violence before dialogue for the next elections could start," he told reporters after voting.
The BNP denounces Hasina's scrapping of the practice of having a caretaker government oversee elections. The Awami League says the interim government system has proved a failure.
Many BNP leaders are in jail or in hiding, and Khaleda says she is under virtual house arrest, which the government denies.
With Hasina residing in an uncontested constituency, neither of the women who have dominated Bangladesh politics for over two decades was expected to cast a ballot.
The European Union, a duty free market for nearly 60 percent of Bangladesh's garment exports, has refused to send election observers, as have the United States and the Commonwealth, a grouping of 53 mainly former British colonies.
"The elections have to happen to ensure a government is formed and the country can start functioning again normally," said Mehedi Rahman, 43, a schoolteacher.
"The unfortunate part is there is hardly any meaning because the opposition has boycotted it and the outcome is known." (Additional reporting by Ruma Paul and Reuters Television; Writing and additional reporting by Tony Munroe; Editing by Ron Popeski)