Just when it seemed that relations between India and Pakistan could not get much worse, the eight-day hijacking of an Indian Airlines plane by Muslim separatists has plunged the two rivals into an alarming new round of accusations and name calling.

In the past four days, the Indian government has claimed it has "conclusive proof" that Pakistan was "neck-deep" in the hijacking plot and that the hijackers acted on behalf of Pakistani intelligence services. Prime Minister Atal Bihari Vajpayee has demanded that the world declare Pakistan a terrorist state.

Pakistan, in turn, has adamantly denied the charges and suggested that India is trying to use the incident to antagonize and isolate Pakistan, partly because it was taken over by a military regime in October and partly to deflect attention from the burning issue of Kashmir, the disputed Himalayan region divided between the two countries.

"The relationship is more brittle now than it has been in a long time," said Uday Bhaskar, an Indian naval officer and deputy director of the Institute for Defense Studies and Analysis. "I think both countries understand each other's war of words," he said, "but there is a wild card of terrorist violence" that can erupt any time in such a volatile atmosphere.

The strained relationship between the two countries and their protracted conflict over Kashmir have drawn special concern internationally since May 1998, when both tested nuclear weapons.

Pakistan, a majority Muslim state, has long supported the Kashmiri rebel movement in India, which is 90 percent Hindu. Pakistan's armed forces have trained and supplied numerous insurgent groups, and last summer they supported rebel fighters who entered India's Kargil mountains and held them for more than two months against India's far larger forces.

In the wake of that conflict and the unexpected takeover of Pakistan by its army chief three months ago, hope for a resumption of talks on a series of issues, starting with Kashmir, seemed extremely dim.

Pessimism continued to grow as insurgent violence in Indian Kashmir, the political heart of the disputed region, surged to levels not seen in 10 years. Since July, Muslim rebels have killed several hundred people in bombings and ambushes in Kashmir, and their leaders have threatened to escalate the attacks further.

Then, on Dec. 24, five armed men hijacked an Indian jet flying from Katmandu, Nepal, to New Delhi with 189 people aboard. The hijackers claimed to support insurgents in Kashmir, and they demanded the release of numerous imprisoned rebels. Finally, they settled for three, who were freed in exchange for the hostages on New Year's Eve.

Although the hijacking drama was brought to a peaceful end, the diplomatic success was rapidly eclipsed in the ensuing bout of accusations between India and Pakistan. Three days ago, one of the freed prisoners, Maulana Masood Azhar, surfaced in Pakistan and gave a rabble-rousing speech, claiming triumph for the Kashmiri cause and warning of more violence against India and the West.

"After the conflict in Kargil, we said we still wanted to normalize relations with Pakistan, but they would have to earn our trust by stopping their support for terrorism against India," said R.S. Jassal, spokesman for India's Foreign Ministry. "Instead, what happened? A graphic example of Pakistan's support for such terrorism."

On Thursday, Indian Home Minister L.K. Advani presented what he said was "irrefutable evidence" that Pakistan was involved in the hijacking. Advani said that Indian police had arrested five men in Bombay who were accomplices to the crime and that they had located photographs of the hijackers identifying them as Pakistanis.

Advani said India had intercepted radio communications between the hijackers and their Pakistani advisers, and he charged that Pakistan was "neck deep" in the plot. Officials said the key evidence was an intercepted phone call from the Bombay group to a journalist in London on Dec. 29 in which a member of the Bombay group threatened that the plane would be blown up if the hijackers' demands were not met.

But Bombay police, contradicting federal authorities, insisted that the arrested men were wanted for a bank robbery and had nothing to do with the hijacking. Pakistan, meanwhile, said it had cooperated fully with Indian authorities during the hijacking and asserted that if the hijackers appeared in Pakistan, they would be arrested and prosecuted.

"These charges are utterly baseless," said Jehangir Qazi, Pakistan's senior diplomat here. "We support the freedom struggle in Kashmir, but that doesn't mean we condoned or organized the hijacking.

"India has had a negative attitude toward Pakistan ever since the change of government," he said. "They want to show we are a failed state, a military state, a terrorist state, in order to deflect attention from the real issue of Kashmir."

The United States and other Western governments, wary of becoming embroiled in the Indo-Pakistani conflict, declined to act on India's call to label Pakistan a terrorist state. In Washington, officials expressed alarm about Azhar's inflammatory remarks, but they stopped far short of blaming Pakistan for the upsurge in terrorist violence against Indian targets.

Western diplomats in the region, meanwhile, expressed concern this week over the escalation of hostilities, stressing that no matter how tense their current relations may be, India and Pakistan eventually must sit down and thrash out their differences.

"We have told them they must stop this infernal bickering," said one Western diplomat. "The real casualty of the hijacking has been Indo-Pakistani relations. It has brought relations to a new and pathological low. We just wish both sides would stop this petty quarreling and start dealing with each other."

Given the events of the past two weeks, however, such a development hardly seems likely. In the wake of the hijacking, a dozen people have been killed in the Kashmir Valley, a passenger train was bombed in New Delhi, and Indian military officials--furious at civilian authorities for giving in to the hijackers' demands--have hinted at India's readiness to wage and win more "limited wars" in the region.

The only ray of hope, analysts and diplomats here said, lies in a basic instinct for survival on the part of both India and Pakistan. Beneath their escalating war of words, they said, the world's two newest nuclear states must realize that if a real war were to erupt on the subcontinent, both would suffer greatly.

CAPTION: ATAL BIHARI VAJPAYEE. . . Indian prime minister