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NEW DELHI/ISLAMABAD, May 29 (Reuters) - India said on Tuesday there could be no talks with Pakistan or military de-escalation until Islamabad stopped exporting "terrorism".

A day after Pakistani President Pervez Musharraf urged India to open a dialogue -- twinning it with a warning that Islamabad would respond to any attack with "full might" -- Pakistan held its third and final "routine" missile test.

Responding to Musharraf's televised speech on Monday, Indian Foreign Minister Jaswant Singh would not rule out war and said the Pakistani president had "spelled out no measures for stopping the lethal export of terrorism from Pakistan".

At the same time, he told a news conference that India would "reciprocate" any move by Islamabad to stop Pakistan being used as a launching pad for militant attacks against India.

Musharraf had "voiced a desire for peace", Singh said. "It is in his hands to do it. Let him simply fulfil the assurances that he has himself given all these months. India will reciprocate."

Fears of war have rattled world leaders. Britain's foreign secretary, Jack Straw, met Musharraf in Islamabad on Tuesday, the latest in a string of envoys who have travelled to the region to urge calm.

He told Musharraf that Pakistan had to bear down "on all forms of terrorism, including cross-border terrorism".

"There isn't any doubt Pakistan has in the past assisted what they would describe as freedom fighters, the rest of the world describes as terrorists or activists, across the Line of Control," he told a news conference in the Pakistani capital.

The Line of Control is a ceasefire line dividing the two armies in Kashmir, the trigger for two of three wars between the neighbours since Britain partitioned the subcontinent in 1947.

Straw, who flew to New Delhi late on Tuesday for talks with Indian leaders, also said the global community agreed there "can be no resolution of the Kashmir dispute by war, by terrorism, by violent conflict".

Musharraf pledged in his speech he would not let militants use Pakistan to cross into India's side of the disputed Kashmir territory -- at the heart of the tense standoff -- to stage raids like one on an Indian army camp this month that fanned tensions.

At the same time, Musharraf said firmly Pakistan would not end support for the "liberation struggle" in Indian-controlled Kashmir and said no rebels were slipping over the border.

The two nuclear-capable countries have mobilised nearly a million men along their borders -- backed by warplanes, missiles and tanks -- since a December raid on the Indian parliament that New Delhi blamed on Pakistan-based militants.

The United States, which views Pakistan as a crucial ally in its war on terror and in its drive against the al Qaeda network in Afghanistan, has urged both sides to show restraint but called on Pakistan to stop infiltration into Indian Kashmir.

Singh decribed Musharraf's speech as "belligerent posturing" that had raised tensions and warned the world India's patience was running out after nearly two decades of militant attacks.

But Pakistan blamed "shrill and intemperate statements" by Indian leaders for escalating tensions.

Analysts said much of the rhetoric, along with the tests of missiles possibly capable of firing nuclear warheads deep into India, was sabre-rattling by leaders trying to placate domestic hawks and cement their own political bases.

Japan, the biggest aid donor to India and Pakistan, weighed in on Tuesday, dispatching its Vice Foreign Minister Seiken Sugiura to the region to play a mediating role.

With the two armies eyeball-to-eyeball, Indian analysts said the biggest risk of conflict could come from an accident or another deadly attack that New Delhi would find hard to ignore.

"I've always said there's going to be no war, but all bets are off if there's another attack...then I think there will be war. India will certainly mount conventional hostilities," Bharat Karnad at New Delhi's Centre for Strategic and International Studies told Reuters.

India says Jammu and Kashmir, its only Muslim-majority state, is an integral part of the mainly Hindu but officially secular nation. But Islamabad accuses New Delhi of massive human rights abuses and says Kashmiris have a right to self-determination.

Dozens of people have been killed and wounded in the past two weeks by daily firing across the frontier and thousands of villagers have fled to safer areas on both sides.

India and Pakistan again traded artillery and mortar fire on Tuesday and Pakistani officials said Indian shelling had killed two men and wounded five people. 

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