Observers say that India's test firing of its newest missile seems certain to set the volatile South Asian region on a dangerous nuclear arms race.

A report in The News, a leading English language daily, says that the Shaheen-I can be fired in a couple of days.

The paper quoted Dr Mubarak Mund, who heads the team of scientists that is working on the missiles project in Pakistan, that the Indian test had ``created a May 1998-like situation and the Pakistani scientists would not disappoint the nation''.

Hardline Islamic parties were also quick to respond, demanding that Pakistan immediately test its own missile.

``We tried hard to convince India not to go this route, but now they have and we will have to respond,'' said Nishat Ahmed, director of the Pakistan Institute for Regional Studies and aretired general in the Pakistan army, who was quoted by a news agency.

Last year, when both India and Pakistan conducted underground nuclear tests, the international community mobilised to try to prevent the two uneasy neighbours from embarking on a nuclear arms race.

But the director of the Institute of Strategic Studies, Tanvir Khan, warned journalists that the race already has begun.

``The weapons already exist ... The decision is on deployment,'' he said.

The front pages of Pakistani newspapers on Monday decried India's test and speculated on Pakistan's response.

Pakistan has three missiles in the wings ready for testing: The Ghauri II, an advanced version of a previously tested ballistic missile, but with a range of 2,000 kilometres (1,200 miles), the Shaheen missile, with a shorter range of 750 kilometres (450 miles) and capable of carrying a payload of 1,000 kilograms (2,200 pounds), the Shaheen II, with a range of 2,300 kilometres (1,380 miles) and capable of carrying a payload of 1,000kilograms (2,200 pounds).

Calling India's testing of the Agni II a threat to security in the region, Pakistan's Foreign Minister Sartaj Aziz said the government would decide an ``appropriate'' response. That is leading most people to believe Pakistan will test its own missile, probably within the next two days.

Pakistan's conservative President Rafiq Tarar said the missile test exposed ``India's aggressive designs''.

Former prime minister Benazir Bhutto said the subcontinent stands ready to make a choice: ``Whether we want to build peace or become another Soviet Union, which despite possessing huge arsenals of nuclear weapons and the largest land mass, ended up having to beg for food from the European Commission,'' she said.

She didn't hold out much hope for peace, saying, ``The introduction of new missiles in the arsenal will only deal a severe blow to the efforts aimed at building peace.''

But the community reacted with fears. The Karachi Stock Market closed 30 points down as traders said that thefeared resumption of economic sanctions if Pakistan replied to the Indian tests.

``We could once again be back to square one,'' said economist Muhammad Aslam, who said that the business community feared that Pakistan would revert to an economic slow-down if sanctions were reimposed. ``They have only been waived temporarily,'' he warned.

The IMF had resumed funding earlier this year on a $1.3 billion programme, but this could be affected if sanctions are reimposed by G-8 countries.