Both sides have been moving troops to the border
They say the deployment is even bigger than that witnessed during the brief conflict in the Kargil sector of the disputed territory of Kashmir two years ago.
Pakistan's military spokesman, General Rashid Qureshi, said the nature of the Indian deployment suggested a desire for offensive action, and that India would find it difficult to back down.
Tensions between the two neighbours have been building since a suicide attack on the Indian parliament two weeks ago, which Delhi alleges was backed by the Pakistani intelligence service.
As villagers continue to leave their homes in search of safety, Pakistani President Pervez Musharraf said he was willing to meet Indian Prime Minister Atal Behari Vajpayee at a summit of regional leaders in Nepal next week.
But "you can't clap with one hand," he said.
'Air strike' claim
Pakistan has refused to comment officially on its own deployments, and says it is simply responding to moves by India.
The BBC's Zaffar Abbas says Pakistani officials claim to have picked up indications of a possible Indian air strike on the night of 21 December, though this has not been independently verified.
The officials said they passed on a warning about the situation to the US.
Washington has been trying to defuse tensions between the two nuclear rivals.
President Bush and the US State Department have urged the two countries to talk to resolve their differences.
UK Foreign Secretary Jack Straw said he was "deeply concerned" about the situation and called on both countries to work together to resolve their differences.
And the G-8 group of industrial nations has voiced "serious concern" about the situation.
In a statement issued in Moscow, they also urge Pakistan to do more against "terrorist groups... which target India in particular".
Diplomatic action
The two countries have announced a number of sanctions against each other.
India was the first to impose the punitive measures, including a ban from 1 January on Pakistan's national airline from flying in Indian air space and a reduction by half of India's diplomatic staff in Islamabad and Pakistan's diplomats in Delhi.
Pakistan retaliated almost immediately with similar restrictions.
Despite that, India says it will allow Pakistani President Pervez Musharraf to fly through Indian airspace to attend the Nepal summit.
Saying he could meet Mr Vajpayee at the summit, Mr Musharraf urged India to show the same willingness to talk.
Indian sources have ruled out any likelihood of a meeting between the two men.
The Indian sanctions were aimed at forcing Pakistan to take action against two Kashmir militant groups, Lashkar-e-Toiba and Jaish-e-Mohammad, which India blamed for a suicide attack on its parliament two weeks ago.
Asked whether he was prepared to move against the two groups, Mr Musharraf said: "We understand our responsibility. We know what we have to do."
Pakistan has already frozen the groups' assets and arrested the founder of the Jaish group, but Delhi is demanding that they be shut down for good.
India's Foreign Minister Jaswant Singh has described the Pakistani actions as "cosmetic measures and non-measures".