MUMBAI - INDIA warned on Monday that the Mumbai attacks had dealt a 'grave setback' to relations with Pakistan, as the United States urged Islamabad to show 'absolute' cooperation with India's probe into the assault.

'What has happened is a grave setback to the process of normalisation of relations and the confidence-building measures with Pakistan,' Minister of State for External Affairs Anand Sharma told AFP.

Mr Sharma said the Islamist gunmen who launched their devastating attack on India's financial capital on Wednesday evening were 'all from Pakistan' and stressed that it was time Islamabad delivered on its promise to prevent Pakistani soil being used for attacks on India.

India and Pakistan, both armed with nuclear weapons, have fought three wars and were on the brink of a fourth over a 2001 militant assault on the Indian parliament.

Pakistan has denied any involvement in the latest bloodshed which left more than 170 dead and threatens to derail a slow-moving peace process launched in 2004. Pakistan President Asif Ali Zardari has urged India not to 'over-react.' US Secretary of State Condoleezza Rice, who is due to visit India on Wednesday, said it was crucial that Pakistan be seen to fully cooperate with the Indian investigation.

'I don't want to jump to any conclusions myself on this but I do think that this is the time for a complete, absolute, total transparency and cooperation and that is what we expect,' she told reporters accompanying her on a trip to Europe.

'What we are emphasising to the Pakistani government is the need to follow the evidence wherever it leads and to do so in the most committed and firmest possible way,' she said.

Maharashtra Chief Minister Vilasrao Deshmukh said Monday he had offered to resign amid widespread public anger over perceived intelligence and security failings that contributed to the bloodshed.

'If the responsibility of the attacks is on the chief minister, then I will go,' Mr Deshmukh told reporters. His deputy, R.R. Patil, had stepped down earlier in the day.

The most high-profile political casualty has been Interior Minister Shivraj Patil who resigned on Sunday after 'owning moral responsibility' and has been replaced.

India's powerful national security adviser offered to quit but will likely stay put.

With a sense of normality only slowly returning to Mumbai, the focus has turned to who might be responsible for the brazen grenade and gun assault on two luxury hotels, a hospital, a railway station, a Jewish centre and other sites.

Indian government sources said New Delhi was almost totally convinced that the attack was carried out by Pakistan-based militant group Lashkar-e-Taiba, with assistance from sections within Pakistan's powerful spy service.

Lashkar, which has been battling Indian troops in Kashmir, was banned by Pakistan in 2002 - but the Indian sources said that ban has never been enforced.

Pakistan has repeatedly underlined that it is fighting its own battle against Islamist insurgents, who have taken their bloody campaign to the heart of the Pakistan capital, and stressed the two nations have a common enemy.

'Even if the militants are linked to Lashkar-e-Taiba, who do you think we are fighting?' Mr Zardari told Monday's Financial Times, noting that Pakistan was battling a welter of militant groups along its border with Afghanistan.

At least 172 people were killed and almost 300 were wounded in the 60-hour assault in Mumbai. A Jewish centre was among the targets, and eyewitnesses said some attackers singled out Britons and Americans.

Tension between India and Pakistan date to the post-independence partition of India in 1947 that created the Islamic state of Pakistan and led to horrific bloodletting between Muslims and Hindus.

India has also had its share of homegrown unrest, from Muslims to Maoists to Hindu extremists, and Indian officials have repeatedly declined to blame Pakistan directly for the Mumbai attacks.

'We have had terrorist attacks before... but this attack was different,' Prime Minister Manmohan Singh said on Sunday. 'They came with the explicit aim of killing large numbers of innocent civilians, including foreign visitors.' -- AFP