India rejected Pakistan's call for a meeting between the two nations' leaders to diffuse regional tension on Saturday and said that Indian troops would continue to gather near the Pakistani border under Pakistan cracked down on Islamic militants.

"Until Pakistan creates a conducive climate by acting resolutely and meaningfully against terrorism, the outlook for such a dialogue cannot be promising," Indian Foreign Ministry spokeswoman Nirupama Rao said Saturday.

The two nuclear-armed nations exchanged gunfire over the "Line of Control" dividing the Kashmir region on Saturday. Civilians on both sides of the border were evacuated, with India saying 20,000 of its citizens were evacuated.

Pakistan warned that a full-fledged conflict could develop from the skirmishes, which began after Islamic terrorists attacked India's Parliament on Dec. 13. That attack killed nine Indians and the five attackers.

"The possibility of a small action could trigger a chain of action and reaction that neither side desires. The propensity for such an outcome is very, very high," Pakistani Foreign Minister Abdul Sattar said in Islamabad.

India and Pakistan have fought three wars since 1947, two of them over Kashmir.

Indian Prime Minister Atal Bihari Vajpayee said India would do its best to avoid that outcome, but reiterated that Pakistan would have to crack down on Islamic terrorists, saying that "no means shall be spared" in putting a stop to what he called "Pakistan-sponsored terrorism."

"We do not want war, but a war in the form of cross-border terrorism has already been thrust of India," Vajpayee told senior officials of his Bharatiya Janata Party. "We shall do our utmost to avoid war with Pakistan."

Pakistani police say at least 30 militants have been rounded up since the attack on India's Parliament, and on Friday, Bush had praised Pakistani President Pervez Musharraf for the arrests.

On Saturday, however, Bush called Musharraf again and said that Pakistan had to "take additional strong and decisive measures to eliminate the extremists who seek to harm India," according to White House spokesman Scott McClellan.

India has claimed that the Pakistani crackdown is only a sham and that two Islamic militant groups based in Pakistan conducted the attack. Pakistan has said it needs proof of India's claims. 

India also claims the attack was sponsored by Pakistan's spy agency; Pakistan denies the accusation, saying it only gives political support to militant groups.

Bush also called Vajpayee on Saturday, saying the United States is "determined to cooperate with India in the fight against terrorism," and reiterated his outrage over the Dec. 13 attack, calling it "a strike against democracy."

On Friday, Bush said he had hoped India would "take note" of Pakistan's recent arrests of militants.

A conflict between the two nations could destabilize U.S. efforts in Afghanistan. Currently, Pakistani forces are stationed on the nation's border with Afghanistan to stop fleeing Taliban or Al Qaeda troops.

The Associated Press contributed to this report.