By Andrew MacAskill and Frank Jack Daniel
DINANAGAR, India/NEW DELHI (Reuters) - Three men carrying assault rifles, bombs and a rocket launcher who went on a murderous rampage in a small Punjab farm town this week have shown how vulnerable India is to attacks that challenge tentative peace overtures with neighbor Pakistan.
Monday's raid in an area that has long been tranquil came weeks after a meeting between Indian Prime Minister Narendra Modi and his Pakistani counterpart Nawaz Sharif.
It fits a pattern of violent surges that make negotiating peace harder between nuclear-armed neighbors India and Pakistan, who have fought three wars since independence in 1947.
Evidence gleaned from GPS units the men carried points to them crossing the Ravi River into India's Punjab a week earlier, Indian police say, effectively opening a new front for commando-style suicide attacks ordinarily limited to disputed Kashmir.
Security analysts say the operation bore the hallmarks of the Pakistan-based Lashkar-e-Taiba group blamed for similar operations in Kashmir and the 2008 Mumbai attacks, where heavily-armed, well-trained young men also used GPS devices to find targets.
India has not openly said the attackers were Pakistani and Pakistan has expressed condolences for the loss of life. Lashkar-e-Taiba did not respond to requests for comment.
While the attack is seen as a provocation, Modi has not reacted with any of the nationalistic rhetoric for which he is known. He has not called off talks between the two nations' national security advisers agreed with Sharif in Russia.
No date has yet been set.
"The moment there is a move to hold talks, they ratchet up the tensions to say 'call it off'. That won't happen this time," said Nitin Gokhale, senior fellow at the Vivekananda International Foundation, a think-tank close to the government.
India's home minister is due to make a statement on the attack in parliament on Thursday. Modi is not expected to speak.
'TRAINED AND DISCIPLINED'
Dressed in fatigues, the group stayed out of sight for six days, making their way through sugar-cane fields and wetlands near the border. They shot their way into Dinanagar at dawn on Monday and stormed the police station, killing seven people.
"They walked forward silently ... in front of my car. They fired about 10-15 bullets through the windscreen. All I could see was blood and broken glass," said Kamaljeet Singh, 54, a restaurant owner who was shot three times.
"They were very well trained and disciplined. They knew how to fire their weapons and they didn't show any emotion."
A railwayman averted a greater disaster when he spotted five explosive devices the men are believed to have planted on a railway track, minutes before a packed passenger train was due to approach.
"The points in the GPS show the route from the border to the railway track where the explosives were found and then the police station," said Punjab's police chief Sumedh Singh Saini.
Police found a kilogram of high powered RDX plastic explosive on the railway lines along with a set of night vision goggles, another officer said.
The exact length is disputed, but India shares about 3,000 km (1,900 miles) of border with Pakistan, running from the Thar desert to Himalayan glaciers.
It is fenced almost the entire length and lit brightly enough to be visible from space, but at ground level much of it is loosely guarded.
In the rainy season, swollen rivers topple stretches of fence and long grass provides cover - exploited by traffickers smuggling increasing quantities of heroin into Indian Punjab.
Militant infiltration had mostly been limited to a 740 km (460 mile) stretch in mountainous Kashmir known as the Line of Control, until two years ago when assaults started moving south to the less militarized area of Jammu.
Kashmir, which both nations partly control but claim fully, has been the cause of two of the three wars India and Pakistan have fought. India accuses Pakistan of sending separatist gunmen into the region to fight.
India's state of Punjab had been free of militant violence for 13 years, since the end of a Sikh separatist uprising, and security forces were unprepared for Monday's bloodshed.
"They are attempting to further stretch the security establishment," said Vivek Chadha, of the ministry of defense-backed Institute for Defence Studies and Analyses.
Chadha, a former army colonel, said the security setup was not in place to repel major strikes in Jammu, or in Punjab.
Witnesses say the men strode unchallenged through the sleepy town of Dinanagar, killing a shopkeeper and hijacking a car before storming into the police station, where one policeman said he fled through a window in his underpants.
Hundreds of police soon had the men cornered in one building, but it took 12 hours to kill them. Few police were wearing bullet-proof jackets or helmets. Four were killed.
"We were all caught by surprise," said a senior police officer who took part in the operation.
"It is a matter of grave concern that Punjab has become a target again," the officer added.
(Additional reporting by Krista Mahr, Douglas Busvine, Tommy Wilkes, Sanjeev Miglani in New Delhi and Mubasher Bukhari in Lahore; Editing by Doug Busvine and Mike Collett-White)