HIGHLIGHTS: Indian Steps Indicate Acknowledgement That Islamabad is Honouring Pledges to Halt Militant Incursions into Indian Ruled Kashmir||Musharraf Unimpressed By India's Moves So Far||Border Shelling Continues as Rumsfeld Heads to the Region|| STORY: India on Tuesday said its warships were moving away from off the coast of Pakistan as U.S. Defense Secretary Donald Rumsfeld headed to the region for talks to defuse a military crisis between the nuclear rivals.

An Indian government source said New Delhi had also selected a new ambassador to Islamabad to replace the envoy it recalled six months ago after an attack on the Indian parliament that India blamed on Pakistan-based Muslim militants.

Both steps to ease tensions follow India's decision on Monday to reopen its airspace to Pakistani over flights in a cautious first acknowledgement that Pakistan was meeting a pledge to halt incursions by militants fighting Indian rule in divided Kashmir.

MUSHARRAF UNIMPRESSED

Speaking before word of India's latest moves, Musharraf appeared under whelmed by New Delhi's earlier announcement that Pakistani commercial planes could again cross Indian airspace after a nearly six-month ban.

"It is a very small beginning. I am looking for more action," Musharraf told a news conference in Abu Dhabi, where he was on a visit, and adding Pakistan wanted "genuine steps" from India.

Asked whether he was going to reciprocate, he said: "Pakistan has done far more than its share in easing the tensions."

CROSS BORDER SHELLING CONTINUES

At least eight people, including four members of one Pakistani family, were reported killed on Tuesday as Indian and Pakistani troops fired across Kashmir's ceasefire line in what has become a daily exchange of artillery and mortar rounds.

Pakistan wants India to stand down its troops on the border, a move India has signalled it does not plan to make until October after state elections in Jammu and Kashmir, and begin bilateral talks on the future of Kashmir as a whole.

India insists no dialogue can start until it has verifiable evidence that Pakistan has dismantled the militants' training camps in Pakistan-administered Kashmir and put a stop to what New Delhi calls "cross-border terrorism".

Shops and businesses were closed in the state's summer capital Srinagar on Tuesday in response to a strike call to protest against the arrest at the weekend of leading hardline separatist leader, Syed Ali Shah Geelani.

RUMSFELD HEADING TO SOUTH ASIA

Rumsfeld was due in New Delhi later on Tuesday. He will hold talks with Indian leaders on Wednesday and will leave for Islamabad the same day to meet Musharraf.

Rumsfeld's trip builds on a visit to both countries last week by U.S. Deputy Secretary of State Richard Armitage, who brought India Musharraf's promise to stop militants once and for all from crossing the ceasefire line that divides Kashmir.

"A week ago the international community was frightened to death that we were on the verge of nuclear war and it looks quite a bit better today," Armitage told BBC World television.

He said both countries had responded to international pleas to cool tempers but "there is lot more de-escalation which needs to be done and I think it will be done over time".

Armitage, asked by the BBC about Musharraf's pledge to halt infiltrations, said Washington was satisfied that the Pakistani leader was a "man of his word" and noted that India had also said publicly that the number of incursions by militants was down.

Indian political analyst Mahesh Rangarayan said Rumsfeld's greatest challenge would be to try to establish a verification system along the mountainous line of control that both countries could accept and set them back on a path to diplomatic contact.

PHOTO CAPTION

Pakistan President General Pervez Musharraf talks at a news conference on the tension with India at the Mushrif Palace in Abu Dhabi on June 11, 2002 prior to travelling to Saudi Arabia. Musharraf said on Tuesday steps taken by India to ease a military standoff between the nuclear-armed neighbors were 'a very small beginning' and more action was needed. (Anwar Mirza/Reuters)