HIGHLIGHTS: Indian Premier Accuses Pakistan of Fighting a Proxy War||Vajpayee Wants His Nuclear-Armed Neighbour to Take His Visit to Kashmir as a Signal||Money Markets Badly Hit in Both Countries||STORY: Indian Prime Minister Atal Behari Vajpayee, in a speech to soldiers massed on the Pakistan border in disputed Kashmir, said on Wednesday the time had come for a decisive fight. (Read photo caption)

"Let's work for victory. Be prepared for sacrifices. But our aim should be victory," he said. "Because, it's now time for a decisive fight," he said in Kupwara in northern Kashmir.

He did not say who the fight would be against.

But nearly a million men are mobilized on the border between India and Pakistan in a standoff over disputed Kashmir.

Tensions between the nuclear-armed neighbors have risen after an attack last week on an army camp in the south of Jammu and Kashmir state, blamed by India on Pakistan-based Kashmiri separatists.

"Let no one think that we'll keep raising the limit of our tolerance," Vajpayee said.

"Our neighbor has found a new way of fighting. They don't fight face-to-face any more," he said. "They don't have the courage to fight face-to-face. They are fighting a proxy war."

India has long accused Pakistan of fighting a "proxy war" against it by training and arming Islamic militants and helping them cross into Indian Kashmir to fuel a revolt there against Indian rule. Pakistan denies the charge.

"The situation is a challenge for us. We have accepted this challenge. We want peace," he said. "But we are being forced to fight a war that has been thrust on us," he said, in an apparent reference to the "proxy war."

"Mercenaries, who have been paid money and promised a dream of paradise, are being sent to be sacrificed," Vajpayee said. "They don't fight. They take the lives of innocent people."

The Indian leader said his decision to visit troops on the front line should be taken as a signal.

"Whether our neighbor understands this signal or not, whether the world takes account of it or not, history will be witness to this. We shall write a new chapter of victory."

India's key 30-issue Bombay share index, which fell to its lowest close this year on Tuesday on rising war fears, extended its fall on Wednesday, shedding about one percent to 3,157.

Pakistani stocks slid more than four percent in late trade amid depressed sentiment over reports of border clashes with India and the death of a prominent Kashmiri leader, dealers said.

PHOTO CAPTION

Indian Prime Minister Atal Bihari Vajpayee meets opposition leaders, not pictured, to discuss the Kashmir issue in New Delhi, India, Tuesday, May 21, 2002. A fierce exchange of gunfire between Indian and Pakistani soldiers killed three civilians Tuesday, hours before the prime minister was to visit disputed Kashmir amid fears of another war between the nuclear rivals. (AP Photo/Ajit Kumar