Skirmishes Intensify on the Indo-Pak Border

The volatile situation between India and Pakistan is flaring up at the border in disputed Kashmir. Kashmir is India’s only Muslim-majority state and the flashpoint for two wars between the nuclear powers. At least three people are reported killed in the latest exchange of fire over the weekend.

An Indian defence official said on Monday troops destroyed a dozen Pakistani bunkers in an exchange of fire between the neighbours. The two have moved troops to the Kashmir border after a deadly suicide attack on India's Parliament earlier this month, in which 14 people including the five assailants died.

Musharraf feels the heat

India blames two Pakistan-based militant groups, Jaish-e-Mohammad and Lashkar-e-Taiba, sponsored by the Pakistan Intelligence Agency (ISI) for the attacks and demands that Pakistan take action against them. But Pakistan President Musharraf denies involvement and counters that India must first furnish evidence that the two are involved.

But the Pakistan President is coming under increasing pressure to rein in extremist groups. US President George W. Bush last week froze the assets of the Lashkar-e-Taiba group and asked Pakistan to crack down on both the groups. The assets of the Jaish-e-Mohammad have already been frozen.

Heavy military build-up

Pakistan has cancelled leave for troops and recalled all its military personnel on leave as part of its high alert to the build-up of Indian troops in Rajasthan, Sindh and Central Punjab borders.

Besides the military build-up on the international border, tension on the Line of Control (LoC) dividing Kashmir is also mounting.

Pakistan has already re-deployed its troops on the LoC, which had been unilaterally withdrawn by the government last year as part of its policy of "maximum restraint" aimed at normalisation of relations with India.

While Islamabad denies providing bases for Muslim militants in Kashmir and says it offers them only moral support, some hawkish Indian politicians have been demanding troops pursue guerrillas across the frontier into Pakistan. Last week India also recalled its envoy to Pakistan and terminated bus and rail links to Pakistan.

Effects felt in financial world

The rising tensions have also affected India and Pakistan's financial markets, with Pakistani shares plunging more than four percent on Monday.

Indian shares and government bonds also dipped on Monday with the weakening of the rupee.