The Indian Prime Minister, Atal Behari Vajpayee, said India was committed to developing friendly ties with Pakistan but the government must create the right environment.

Meanwhile, Mr Vajpayee has named his new cabinet, retaining many of his earlier colleagues.

Mr Vajpayee spoke after taking the oath of office at a special ceremony presided over by President K R Narayanan.

"We are monitoring the situation and keeping ourselves fully informed," he said.

Atal Behari Vajpayee: "We will continue to monitor developments"

Later Mr Vajpayee said that India was willing to talk to any regime in Pakistan.

He was speaking to reporters after a meeting of the cabinet committee on security, which was held immediately after his government was sworn in.

India's chief of army staff, General V P Malik, is reported to have said the country will have to be extra vigilant and that the developments in Islamabad are not conducive to regional stability.

The Indian military is on high alert.

The BBC's Daniel Lak: "The prime minister's office has expressed the country's grave concern"

Officials from the Border Security Force in Punjab said they had instructions to step up surveillance and watch for any signs of military activity on the Pakistan side.

The BBC's Daniel Lak says the coup could not have come at a worse time and the response of India, along with the rest of the international community, will be crucial to future peace in South Asia.

Key ministers retained

Mr Vajpayee takes office for the third time as prime minister after his BJP-led alliance won the recent elections.

Many of his former cabinet colleagues have been retained. Most notably, Jaswant Singh continues at the Foreign Office, L K Advani as Home Minister, George Fernandes at Defence and Yashwant Sinha in Finance.

Many of Mr Vajpayee's allies have been accomodated in powerful posts. Mamata Bannerjee, of the Trinamool Congress, has been given the key Railway portfolio, while Murasoli Maran of the Tamil Nadu based DMK party is the new Commerce and Industry Minister.

One of the largest allied parties, the Janata Dal (United), got a major share of key cabinet posts, including defence, telecommunications, civil aviation and surface transport.

The powerful Information Ministry went to Arun Jaitley - a former lawyer and BJP member who is not a member of parliament.

The previous government lost a parliamentary vote of confidence after a key ally from south India, Jayalalitha Jayaram, withdrew her support.