by Mary Hennock BBC News Online business reporter

As Westerners began flocking to India in the 1970s, Kashmir's mountain valleys quickly became one of the most popular destinations on the hippy trail.

Word of Srinagar's beautiful lakesides, dotted with ornately-carved houseboats, soon turned the region into a stopping off point for travellers in every budget bracket.

Tension between India and Pakistan over the disputed border territory has long put Kashmir out of bounds for tourists.

But now friction over Kashmir threatens to delete the rest of the Indian subcontinent from the tourist map.

Ignored

So far, the only bright spot for international tour operators, and for local people who depend on the industry, is that travellers appear to have ignored warnings from Western governments to leave the country, or avoid going there in the first place.

Indian police at the Red Fort, Delhi

"Our flights are quite full...we haven't really noticed any increase either way," a spokeswoman for British Airways told BBC News Online.

Other airlines have also reported that passenger loads are normal for the time of year.

Over recent weeks, the war of words between the two nuclear-armed powers over the Line Of Control in Kashmir, the de facto border, has threatened to escalate into something worse.

Nuclear threat

Tension eased ahead of a peace mission by US Secretary of State Donald Rumsfeld, and India agreed to withdraw warships from the waters off Pakistan.

But the UK Foreign Office remained adamant that its advice to British citizens to leave India was staying in place. "It's a very serious situation," a Foreign Office spokeswoman told BBC News Online.

Just as we're seeing signs of a turnaround this happens, so it's a great shame

Adrian Burley, Abercrombie & Kent

Within hours of Mr Rumsfeld's departure from Pakistan, a car bomb exploded outside the US consulate in the Pakistani port of Karachi and shelling by both sides had killed civilians in Kashmir.

Half a million people went to India from Britain last year, though probably only about a quarter were sightseers.

The figure includes holiday visits to friends and relatives and business travel.

Tour firms 'wait and see'

The big tour operators have been breathing a sign of relief that the crisis has struck in mid-summer.

They still have time to decide how many charter planes and pre-booked hotel rooms to hang onto in popular winter sun spots like Goa.

But big tour firms start booking capacity up to a year and a half ahead. So will they get their fingers burned? The industry is keen to insist not, but reluctant to discuss details.

It's terribly sad for the local people....That's their season wiped out

Mark Wright, Travelbag Adventures

A spokesman for Europe's second biggest leisure group, Thomas Cook, acknowledged that next winter's accommodation contracts "would have been agreed at the end of last year".

The number of rooms involved, however, was "commercially sensitive", as were details of how many tourists Thomas Cook's companies took to India last year.

"There is an element of flexibility" in such contracts, he insisted.

As to when cancellations might have to be made, "We'll have to wait and see how things develop."

Several calls to Kuoni failed to produce anyone willing to be interviewed.

11 September impact

Contracts to hold rooms and airline seats are "incredibly complicated" and variable, said Frances Tuke of the Association of British Travel Agents (ABTA).

The implications are therefore "a guessing game", she said, but the industry ditched pre-booked capacity worldwide after 11 September using break clauses in the contracts.

Pakistan has reacted cautiously to the Indian naval withdrawal

The most forthcoming firms tended to be specialists in the top-end, tailor-made segment of the market.

"It's all done completely on demand...we never prebook accommodation," Adrian Burley, marketing manager for Abercrombie & Kent said cheerfully.

India provided between 8% and 15% of �20m ($29.5m) of the international firm's UK sales last year.

India's tourism market has already been damaged by 11 September, which raised tensions to the north, and a gun and grenade attack on the Indian parliament last December.

"Just as we're seeing signs of a turnaround this happens, so it's a great shame."

Dropping India as a destination remains unthinkable. "Brits have a great love for the country...our customers will want it," said a spokeswoman for another tailor-made tours firm, Travelbag.

Travelbag - whose holiday prices average �1500 to �2000 - has flown to India for many years but was unlucky enough to launch tailor-made tours there last September.

Travelbag was contacting customers to cancel June departures for about 30 people.

Locals lose out

But those facing hard decisions immediately are mostly smaller firms in the adventure travel market, which operate summer treks in the Himalayas, such as sister firm Travelbag Adventures, with annual sales of �6m.

Managing director Mark Wright said the firm was cancelling its summer trek to Ladakh, bordering Kashmir, for which up to 16 people have paid �1339.

But forward planning must go on. He was in the midst of contacting airlines to request seat allocations for the firm's 2003-4 brochure due out in October.

But instability since 11 September means "demand has been tempered to India generally", he said.

Like many operators, he thinks Sri Lanka is "absolutely booming" and has picked up trippers lost by the Middle East since 11 September.

Big and small tour firms alike say they have plenty of other destinations to offer customers, from treks in Peru and Morocco to beach resorts in South Africa.

The biggest losers are Indian guides, hotel and restaurant owners.

"It's terribly sad for the local people....That's their season wiped out," said Travelbag Adventure's Mr Wright.

Ladakh "really is very, very poor," he said.

If tension continues, then tour operators will have to make tough choices about the winter season.

Airlines

What if you've already booked a holiday in India?

ABTA is advising its members that people whose holidays are cancelled are entitled to a refund, but not compensation as government travel warnings are 'force majeure' events "totally beyond the control of the operator."

Most airlines are offering the chance to rebook the flight at a later date, so customers must take a gamble on whether they think peace will break out, or accept vouchers instead.