After nearly a month of fighting in icy reaches of the Himalayas claimed by both India and Pakistan, Indian troops have made enough military gains for New Delhi to all but declare victory in the latest round of hostilities over the disputed territory of Kashmir.

But as Islamic guerrillas cling to their high-altitude position and dozens of Indian troops return home in white-draped coffins, official rhetoric in both New Delhi and Islamabad is focused less on how to resolve the Kashmir conflict than on what the next military steps could be. Indian authorities said this week for the first time that they would consider sending troops into Pakistani territory if necessary, and some observers warned that if the Pakistani-backed guerrillas keep losing ground, Pakistan's armed forces might intensify the fight.

India and Pakistan have been at loggerheads over Kashmir since 1947, when Britain withdrew from India and created Pakistan as a separate Muslim state, and have fought two wars over the region. But the current conflict differs dramatically from the skirmishes that break out each year when the Himalayan snows melt and troops move to commanding heights along the 450-mile Line of Control separating Indian- and Pakistani-controlled Kashmir. The fighting is described by both sides as the fiercest in decades -- and the clash is the first significant one since the weapons tests last year that established the rivals as the newest nuclear powers.

The conflict began to unfold this spring when several hundred armed fighters crossed from Pakistani Kashmir into Indian Kashmir territory and dug themselves into strongholds atop a series of strategic mountain ridges in the Kargil region. Pakistan claims the fighters are Islamic "freedom fighters" whom they support politically but not militarily; India claims the men are largely Pakistani troops, with a smaller number of foreign mercenaries including Islamic militants from Pakistan and Afghanistan.

India, initially caught by surprise, launched unprecedented airstrikes on the region May 26 and then sent in tens of thousands of troops to dislodge the intruders. Indian forces have been fighting a literal uphill battle to rout them ever since.

Each day for nearly two weeks, Indian officials have given increasingly optimistic reports on their progress in beating back the "infiltrators," even as Indian casualties have reached more than 100 killed. Military spokesmen describe each new ridge point taken, each new batch of weapons captured and each new enemy combatant killed, identifying most as Pakistani soldiers.

It is only a matter of time, they assert confidently, before the mopping up operations are completed, the intruders are routed from the hills and the Line of Control is again intact.

On the diplomatic front, authorities in New Delhi are claiming even headier success. They say they are convincing the world that India has been victimized by Pakistani aggression. Statements from Washington and from leaders of the eight top industrialized nations meeting in Europe last weekend have avoided blaming Pakistan by name but have demanded that armed intrusion cease and the Line of Control be restored.

Accordingly, analysts here and in Islamabad say, Pakistani authorities have been badly bruised after their initial euphoria over capturing a chunk of strategic territory and drawing swift international attention to an issue India has always insisted on settling locally.

"The reality is that Pakistan faces daunting challenges . . . to reverse the perceptions of much of the international community about how the latest flare-up started over Kashmir and what should be done to address this," said today's lead editorial in the News, an influential Pakistani newspaper. "Any flight from reality or delusions at this critical juncture will inevitably set back the country's case."

But even though -- and perhaps because -- the tables have tilted toward India so quickly, there is still a danger that the conflict could escalate into a broader war.

Indian officials have repeatedly declared a "no first use" policy regarding nuclear weapons and pointed out that their arsenal is firmly under civilian control. This week, when a grass-roots group affiliated with the ruling Bharatiya Janata Party virtually demanded that India teach Pakistan a nuclear lesson, officials denounced the statement as irresponsible nonsense.

Some analysts here, however, say they are still concerned that the Kargil conflict could spiral into a major conventional conflict. Indian military officials, frustrated by the difficult terrain and mounting casualty rate, are reportedly considering an attack at another point on the long Line of Control. And on Tuesday, Indian officials said for the first time that if "national interests" are threatened, they would not rule out sending military forces across the line -- although Prime Minister Atal Bihari Vajpayee declared today that "we do not intend to cross the Line of Control."

Conversely, as Pakistani military officials see their fighters steadily losing ground, they might decide to raise the ante rather than face domestic humiliation. The dispute over Kashmir is an obsessive cause among Pakistan's armed forces, which have long wielded considerable political power at home and have never forgiven India for trying to seize land along the Line of Control in 1972 and 1984.

"The Pakistani army's chief aim is to maintain political primacy. I can't imagine them just going back to the barracks and saying, `Sorry, we misfired,' " said P.R. Chari, director of the Institute of Peace and Conflict Studies in Srinagar. "If they get desperate and see they are losing power . . . could they indulge in a final madness and stage a coup in order to preempt being called to account for their failure?"

Officially, Pakistani authorities continue to assert that they provide nothing but moral support for the Islamic "freedom fighters" they say launched the incursion. But a Pakistani military spokesman acknowledged last week that some Pakistani soldiers have crossed the Line of Control, and Indian officials recently displayed a taped telephone conversation that seemed to show two Pakistani generals discussing how to run the cross-border attack.

Privately, some knowledgeable Pakistani sources suggested that civilian authorities in Islamabad exercise little control over the military and religious interests that fomented the Kashmir operation. Last week, leaders of armed Islamic groups and former military officers held a rally in Rawalpindi, Pakistan, threatening to bring down the government of Prime Minister Nawaz Sharif if he "betrayed" the insurgents.

"If Nawaz tried to pull out the support for Kargil, he wouldn't survive," acknowledged a highly placed Pakistani source.

And what happens to relations between the two countries after the Kargil conflict, even if the resolution is acceptable to both sides? The answer is already a matter of debate.

Some Indian officials suggest the longtime rivals can return to their businesslike but wary relationship and continue working to resolve the longstanding Kashmir issue, as if Kargil had never happened. "As far as India is concerned, as soon as the aggression is reversed, we want to go back to normal and reconsider starting a dialogue again," said Raminder Jassal, a spokesman for India's Foreign Ministry. "There is no need for us to get hysterical or inflict punishment on Pakistan. We have a larger vision to ensure an improved relationship and a less hostile neighborhood."

But Sharif said today: "If there is war, or if the present confrontation continues on the borders, it will bring so much devastation, the damage of which will never be repaired."

And even some observers in India's security establishment suggest the clash has done serious and long-lasting damage to the progress that their civilian leaders had recently made toward more cooperative and open relations.

"Peace in South Asia has been set back, there is no doubt," said Asfir Karim, a retired general who edits a journal on regional conflict and serves as an adviser to India's National Security Council. "This is a defining moment, because Pakistan has made it clear they will use military means to obtain its goals in Kashmir. No one in India is in favor of starting another war, but Pakistan wants to put India in the dock. They are playing a dangerous game, and the sooner it is undone . . . the better."

CAPTION: Prime Minister Atal Bihari Vajpayee says India does not intend to cross the Line of Control dividing Kashmir. India, however, launched heavy artillery and air attacks against the entrenched guerrillas.