Pakistan has announced that one person was killed when Indian Forces shelled villages on the Pakistani side of the border of Pakistani Kashmir. Police sources meanwhile accused India of opening unprovoked fire on the villages adding that two children were also injured in the shelling. The incident came as India vowed on Wednesday to take action in response to a bloody attack blamed on Pakistani-based fighters in contested Kashmir, which has stoked tensions with Islamabad and threatens to derail a U.S. diplomatic push.

"We will have to retaliate," Prime Minister Atal Behari Vajpayee told parliament, describing Tuesday's attack that killed more than 30 soldiers and members of their families as "a massacre of innocents".

Vajpayee did not say what form the action could take or who it would be directed against, and the Hindi word he used has a wide range of dictionary meanings, including revenge and counter-action.

Pakistan has condemned the attack and called for an investigation.

The nuclear rivals have massed a million men along their border since December in a confrontation over the Himalayan region at the heart of two of their three wars.

U.S. Assistant Secretary of State Christina Rocca, in New Delhi on her third round of shuttle diplomacy since March, said the raid by the militants was aimed at sabotaging efforts to ease tensions between India and Pakistan over Kashmir.

The confrontation is entering a crucial phase as the Himalayan snows melt and Indian intelligence agencies assess whether Pakistani President Pervez Musharraf has honoured a pledge to stop fighters slipping across the border.

PHOTO CAPTION

An Indian soldier stands besides the bodies of three suspected Islamic militants in an army camp at Kaluchack, near Jammu, on May 14. The suspects killed 30 Indian soldiers with their families before being gunned down themselves. REUTERS/Stringer