Relations between India and Pakistan are cratering following a deadly militant attack in Indian-administered Kashmir that has sparked tit-for-tat reprisals and raised fears of another military escalation between the nuclear-armed rivals.

An attack on tourists in India's Himalayan territory of Kashmir this week sparked a new crisis between nuclear armed South Asian neighbours India and Pakistan, with New Delhi blaming militants with "cross-border linkages" for the killings.

Troops from Pakistan and India exchanged fire overnight across the Line of Control in disputed Kashmir, officials said yesterday, after the United Nations urged the nuclear-armed rivals to show "maximum restraint" following a deadly shooting in the region.