The Indian government raised the country's security to a "war level" yesterday saying it had certain proof of a Pakistani link to the Mumbai attacks.

The dramatic move prompted Pakistan to say it would end military operations against Islamist militants on the Afghan border, which are critical to the "war on terror", for an "unwanted conflict" with Delhi.

With bodies being pulled from the Taj Mahal hotel, where gunmen had made their last stand after a rampage that left more than 170 dead, Sri Prakash Jaiswal, India's minister of state for home affairs, said the country's "intelligence will be increased to a war level, we are asking the state governments to increase security to a war level". The Press Trust of India, India's official news agency also reported that the government was considering suspending the four-year-old peace process with its neighbour.

Pakistan's government has condemned the Mumbai assault as a "barbaric act of terrorism" and denied involvement by any "state institutions". But the group named by India, Lashkar-e-Taiba, has longstanding relationships with Pakistan's security establishment.

The US and UK have been urging restraint since the Mumbai terror attacks and escalating tensions on the subcontinent are likely to top the agenda when Condoleezza Rice, the US secretary of state, meets David Miliband, the foreign secretary, today in London.

The Indian minister said yesterday there was "no doubt that the terrorists had come from Pakistan ... We have evidence of their nationalities. We will reveal everything soon".

Indian police say they have in custody one of the gunmen, a 21-year-old Pakistani, Ajmal Amir Kasab, and detailed accounts of an alleged confession given by him have been played out in the Indian media. Authorities have also recovered a satellite phone that appears to corroborate much of his testimony.

A fresh confrontation between India and Pakistan would jeopardise attempts by western powers to persuade Pakistan to take on militants linked to the Taliban and al- Qaida in its tribal regions bordering Afghanistan, rather than pitting its forces against India. Pakistani defence sources said nearly 100,000 troops deployed on the western frontier with Afghanistan could be pulled back to deal with a more immediate threat.

In India the government is struggling to contain public anger over the attacks with demonstrators taking to the streets to vent their anger over the inability to stop the killings. The wave violence unleashed claimed its first political casualty yesterday when India's home minister, Shivraj Patil, resigned as the government struggled under growing accusations of security failures.

India's ruling Congress party, which faces a general election next year, has been attacked by opponents for being soft on terrorism, a potent charge given that India has suffered a major attack every month this year. The government said last night it would be urgently upgrading maritime and air security and looking to create a federal investigative agency.

The peace process between India and Pakistan now appears in doubt. "There is a view in the government that India should suspend the peace process ... to show that it is not going to take lightly the deadly carnage in Mumbai," the Press Trust of India reported. It quoted sources as saying the government, "including Prime Minister Manmohan Singh, is very upset as it feels that Pakistan has not kept its promise made at the highest level to end terrorism directed at India".

Lashkar-e-Taiba, which is fighting Indian control of the disputed Kashmir region, was behind a deadly 2001 assault on the Indian parliament that pushed New Delhi and Islamabad to the brink of war.

It is believed at least 10 militants carried out the assault on Mumbai. Among the dead were 18 foreigners, including six Americans and a Briton.