India says it will relax its ban on Pakistani flights over its territory to make it possible for the Pakistan's president to attend a regional summit in Nepal next week. However, the India-Pakistan border remains tense, as shelling continues and Indian officials say two civilians were killed and five others injured.

An Indian foreign ministry spokeswoman, Nirupama Rao, says India will facilitate the attendance of Pakistani President Pervez Musharraf at the South Asian regional summit, in Nepal in early January. The spokeswoman says President Musharraf's aircraft will be permitted to overfly India en route - if Islamabad makes a request.

Indian Prime minister Atal Behari Vajpayee is also scheduled to attend the summit, but New Delhi has ruled out a meeting between the two leaders on the sidelines, to discuss the deepening tensions.

Defense officials say intense shelling in the Poonch sector of Jammu and Kashmir state Friday broke two days of relative calm, along the border between India and Pakistan. Hundreds of residents of border villages were forced to flee their homes.

Thousands of civilians along the border in India have already moved to safer places, following a massive deployment of troops, equipment and fighter jets by both countries

India's foreign ministry spokeswomanreiterated calls for Islamabad to take what she termed "precise and focussed" steps against two militant groups which New Delhi says were responsible for the attack on its parliament earlier this month.

After announcing new sanctions against Pakistan, Thursday, India's foreign minister accused Islamabad of failing to understand the gravity with which New Delhi views the matter, and urged the international community to understand India's point of view.

"We cannot work on the basis of that there is a good terrorist or bad terrorism or that terrorism west of Pakistan is unacceptable, but east of Pakistan is acceptable," Mr. Singh said. " We do not accept any such categorization In fact United States also does not subscribe to them - I have been assured."

The diplomatic and economic sanctions are the toughest measures since the two countries went to war in 1971. Both countries are cutting diplomatic staff by half, and closing their airspace to the other nation's civilian aircraft.

International pressure on the two countries to head off a potential conflict is increasing. Russia and Germany are the latest to be in touch with Indian leaders in an effort to defuse the crisis. But India's Foreign Minister says talks with Pakistan are neither "practical nor possible."