After India tested a new model of the most potent nuclear-capable missile in its arsenal Friday, Pakistan responded by saying the test could undermine the stability of an already tense region.

A short-range version of the Agni-I, the missile was launched from Wheeler's Island off India's east coast and soared over the Bay of Bengal.

"Agni is an ongoing project. We are taking many more steps for the nation's security and protection. This is one of them," Prime Minister Atal Bihari Vajpayee said in a broadcast message.

Meanwhile, soldiers, ballistic missiles, and tanks continue to face each other across the India-Pakistan border in the two countries' biggest military standoff in decades.

Indian officials said the test was planned long before the current crisis and Pakistan, the United States, China and the Western powers were notified in advance.

"The test was conducted in a non-provocative manner and has no bearing on the situation on the India-Pakistan border. This should not aggravate any tensions on the border or between India and Pakistan," Foreign Ministry spokeswoman Nirupama Rao said.

But Pakistan claimed the test threatened to destabilize the region.

"We hope the international community will take note of this Indian behavior which is prejudicial to the pursuit of stability in our region, especially during the current situation," a Pakistani Foreign Ministry statement said.

"Pakistan has the means to defend itself," the statement added.

Despite U.S. and international efforts to defuse the crisis, India said Friday it would not decrease its troop presence on the border with Pakistan.

India's powerful Home Minister Lal Krishna Advani on Friday said Pakistan had yet to act on Indian demands for the return of 20 men wanted for terrorist acts. Until some action was taken, he said, tension between the nations would remain high.

"At the moment, the government decision is that the present situation will continue," Advani told reporters.

The nations have fought two of their three wars over the divided Himalayan province of Kashmir, which both claim in its entirety. India accuses Pakistan of backing Islamic militants fighting for independence in the Indian-controlled part of the province. Pakistan denies the charge, and accuses mainly Hindu India of oppressing Muslims in Kashmir.

The current standoff was sparked by the bloody Dec. 13 suicide attack on the Indian parliament, which India blamed on Islamic militants based in Pakistan.

The militant groups and Islamabad denied any involvement in the attack, and Pakistan's President Pervez Musharraf outlawed five militant groups and arrested some 2,000 militants in response.

Overnight, Pakistani and Indian troops exchanged small arms fire in southern sectors of Kashmir, but there were no immediate reports of casualties, Pakistani officials said Friday. Firing across the line of control has been a daily occurrence.

The missile test came just before U.N. Secretary-General Kofi Annan was to arrive in Pakistan on Friday.

British Foreign Secretary Jack Straw said India's decision to test a nuclear-capable ballistic missile "sends the wrong signals" in the tense region. Germany also criticized the timing of the test.

Pakistan's arsenal includes nuclear-capable ballistic missiles with ranges of up to 900 miles, capable of reaching most targets in India.

The new Agni missile has a range of 420 miles, compared with the earlier version, which has a range of 1,500 miles. Agni means "fire" in Hindi, India's national language.

India's missile arsenal includes army and air force versions of the short-range, nuclear-capable ballistic missile Prithvi; the Trishul, a surface-to-air missile that targets aircraft and can counter sea-skimming missiles; and the anti-tank Nag missile.

India, which conducted five nuclear tests in 1998, says it is developing its missile program as a deterrent against neighbors China and Pakistan.

The Associated Press contributed to this report.