Evidence suggests that the militants who swept through India's financial capital Wednesday, then fought off Indian commandos in two of Mumbai's poshest hotels until Saturday morning, received training from Lashkar-i-Tayyaba, an anti-India militant group in Pakistan.
If Indian-Pakistani tensions escalate, it could unravel improving ties between the nuclear-armed nations and imperil Pakistan's progress in fighting militants on its Afghan border – a US priority.
Yet the Mumbai attack has also focused Indians on the failures of its own government. It was the sixth major terrorist attack since May. For a nation eager to be seen as one of the world's next superpowers, it marks a test of leadership – at home and in the region.
With national elections coming next spring, Indian politicians must resist the temptation to politicize the issue, says Rohan Gunaratna, a terrorism analyst at the Institute for Defense and Strategic Studies in Singapore.
"India's leaders must understand that this is a national challenge and it must not be driven by electoral or political compulsions," he says.
India sits at a nexus of terrorist attacks – amid a ring of violent states and home to a Muslim minority that feels increasingly alienated from the country's economic ascent. Between 2004 and 2007, only Iraq saw more terrorism-related deaths than India, according to the US National Counterterrorism Center in Washington.
Indeed, the threats to India are so varied and mutating that it was not clear who was responsible for the attacks even two days after they began. The largest bombings of recent months have been carried out predominantly by Indian Muslims who called themselves the Indian Mujahideen.
But evidence has led Indian officials and terrorism analysts to point the finger for this attack – which killed at least 174 and wounded 239 – at Lashkar-i-Tayyaba.
The use of heavily armed fighters – as opposed to suicide bombers – is a hallmark of Lashkar-i-Tayyaba, which seeks to liberate the disputed state of Kashmir from India. The one surviving militant in Indian custody also said the attackers were trained in Lashkar-i-Tayyaba camps in Pakistan, according to reports.
This has rekindled an oft-repeated cycle of allegations and threats between India and Pakistan. In 2001, India's allegations that Lashkar-i-Tayyaba was behind an attack in the Indian Parliament brought the two nations to the brink of war. Already, Pakistan has said it is willing to send 100,000 troops to the Indian border if India takes an antagonistic line.
New 'maturity' in India-Pakistan ties
"There is now a level of maturity in the Indian and Pakistani governments to handle this," he says, suggesting that a repeat of the 2001 military buildup along the border is unlikely.
"The American priority is that Pakistan keeps focused on the western border," says Hassan Askari Rizvi, an independent political analyst in Lahore. "But Pakistan has now made it clear that the eastern border will be its priority if India shows any signs of escalation."
But India and Pakistan have found greater common ground, particularly since Pakistani President Asif Ali Zardari took office in September. In a recent teleconference with the Hindustan Times, an Indian newspaper, he went so far as to say he would not use Pakistan's nuclear arsenal to strike India first – breaking with years of Pakistani military doctrine.
This has given a ring of sincerity to Pakistan's claims that it was not involved in the attack, as well as its vows to investigate any evidence that the terrorists were trained in Pakistan.
Moreover, it is in India's interests to strengthen Mr. Zardari and his civilian government, says B. Raman, former counterterrorism head of India's premier military intelligence agency, the Research and Analysis Wing. Undermining Zardari will only strengthen the Pakistani Army, which is generally much less sympathetic to India, given that the countries have fought three wars.
The Indian government "will not allow its anger [at Pakistan] to get beyond a certain point," Mr. Raman says.
Anger at Pakistan remains a potent force in India. On Saturday and Sunday, small crowds moved through the streets of Mumbai chanting anti-Pakistan slogans.
Yet the first action taken by the Indian government Monday was to look inward, not across its border. The embattled minister of home affairs, who is charged with domestic security, resigned from the cabinet Sunday. National Security Adviser M.K. Narayanan submitted his resignation as well, according to local TV news.
The resignations come ahead of an all-party meeting set for Sunday evening, which is poised to discuss new antiterror measures in India – including new laws, and possibly a new agency.
Indian Prime Minister Manmohan Singh said Sunday he would boost the size and strength of the country's antiterror forces.
Warnings of attack
Before last week's attacks there had been several indicators that Mumbai was in terrorists' cross hairs. One Lashkar operative captured by Indian authorities in January admitted that he was scouting the Taj and Oberoi hotels, according to a report by the Times (of London).
The Indian Express reports that Indian intelligence had intercepted a message on Nov. 19 claiming Mumbai would soon be attacked by sea – which is how some of the militants arrived in the city.
Coming after the string of bombings by the domestic Indian Mujahideen, the failure to stop the Mumbai attacks suggests a fundamental problem, says Raman, the former counterterror official. "When things go on happening one after the other, it shows that the intelligence agency isn't good enough."
But this presents India with an opportunity – both domestic and international – to take important steps toward fighting terrorism, Mr. Gunaratna continues. "The most important thing is that both nations [India and Pakistan] realize they are facing a common threat," he says.
• Shahan Mufti contributed from Islamabad, Pakistan.