A protracted India-Pakistan military standoff will seriously impact the software industry and dry up foreign investments, said India's main software lobby group and government officials on Tuesday.

The National Association of Software and Service Companies (NASSCOM), said the domestic industry which had spawned several US technology-heavy Nasdaq-listed firms, was worried the ongoing tensions could escalate into a full-scale war.

"If the standoff does continue for long it could begin to affect business," said Kiran Karnik, president of NASSCOM.

"NASSCOM has assessed the geo-political risk and the possible impact on the Indian software and service industry due to the recent tensions between India and Pakistan," he added.

India's software industry which attracted foreign direct investments of roughly 453 million dollars in the financial year ended March 2002, fears foreign currency will dry up as investors give South Asia a wide berth.

The governments of developed nations said Tuesday that they were not ruling out the possibility of war between India and Pakistan, which

had already deployed a million troops to their common borders, in the wake of a May 14 attack in disputed Kashmir.

India blamed the attack that killed 35 people, mostly civilians, on Pakistan-based guerrillas and demanded Islamabad stop "crossborder terrorism."

NASSCOM is organising a two-day conference in the southern hitech city of Hyderabad in Andhra Pradesh state on June 10 to focus on India's strategy to deal with the current business environment.

Randeep Sudan, special secretary in technology-savvy Andhra Pradesh Chief Minister Chandrababu Naidu's office, said the government was worried foreign firms would put Indian investments on the backburner.

"Foreign investment deals that were almost finalised have now been put on hold because of the war fears," Sudan told AFP.

"The darkening war clouds make India suddenly look like a risky investment proposition," he added.

Sudan added that a large number of Fortune 500 companies which were looking at outsourcing operations out of India had put their business plans on hold till the current crisis blew over.