A day after a crisis meeting here failed to break the deadlock over Kashmir, India and Pakistan both warned they were prepared for war if the conflict in the disputed Himalayan region worsened.

Indian Prime Minister Atal Bihari Vajpayee, addressing front-line troops in Kargil today, said India would not relent until hundreds of guerrillas occupying strategic heights inside Indian territory were beaten back into Pakistan.

"We want peace, but we are also keeping ourselves ready for war," Press Trust of India quoted Vajpayee as saying.

Artillery shells hit a village about a mile from the helipad where Vajpayee landed today for the start of a two-day visit to Kashmir.

In nearby mountains, Indian troops backed by air power continued high-altitude battles to try to sweep the guerrillas from their vantage points.

Vajpayee said Pakistan had betrayed India after signing the Lahore Declaration in February aimed at improving relations. He said Pakistan had annexed Indian territory, violating the Line of Control established in 1972.

Pakistan's Foreign Minister Sartaj Aziz argued that the frontier was not clearly delineated in snowy mountainous areas, and should be clearly marked on the ground. But India dismissed the proposal as a coverup for a land grab by Pakistani-backed infiltrators.

Aziz had said after Saturday's frosty exchanges with Indian leaders that he believed there would be no further intensification of the conflict.

But back in Islamabad today, he said, "In sum, we want peace, but if war is imposed on us we have the capability to defend ourselves and our vital national interests."

In Punjab state, United News of India reported people were streaming out of border towns close to the city of Amritsar, fearing war.