MUMBAI India warned Monday that the Mumbai attacks were a major setback to relations with Pakistan and promised a stern response, as Washington urged Islamabad to cooperate fully with investigations.

What has happened is a grave setback to the process of normalisation of relations and the confidence-building measures, Minister of State for External Affairs Anand Sharma told AFP.

Sharma said the gunmen who launched their devastating attack on Indias financial capital on Wednesday evening were all from Pakistan and that Islamabad had failed to deliver on its promise to prevent Pakistani soil being used for attacks on India.

At least 172 people were killed and almost 300 were wounded in the 60-hour assault in Mumbai. A Jewish centre was among the targets and eyewitnesses said some attackers singled out Britons and Americans.

Pakistan has denied any involvement in the latest bloodshed which threatens to derail a slow-moving peace process launched in 2004. Pakistan President Asif Ali Zardari has urged India not to over-react.

India and Pakistan have fought three wars and were on the brink of a fourth over a 2001 militant assault on the Indian parliament.

Indias ruling Congress party said any response would be carefully considered but made it clear that a line had been crossed.

We have been confronted by a rising tide of terrorism for some time but the attack in Mumbai was qualitatively different and calls for immediate and stern action, Congress party spokeswoman Jayanti Natarajan told reporters.

With a sense of normality only slowly returning to Mumbai, the focus has turned to who might be responsible for the brazen grenade and gun assault on two luxury hotels, a hospital, a railway station, a Jewish centre and other sites.

Indian government sources said New Delhi was almost totally convinced that the attack was carried out by militant group Lashkar-i-Taiba, with assistance from sections within Pakistans ISI.

Lashkar, which has been battling troops in Indian-administered Kashmir, was banned by Pakistan in 2002 — but the Indian sources said that ban had never been enforced.

Pakistan has repeatedly underlined that it is fighting its own battle against insurgents, who have taken their bloody campaign to the heart of the Pakistan capital, and stressed the two nations have a common enemy.