The US embassy in New Delhi said the decision would not have any impact on India-US relations.

The decision came after two hours of deliberations within the security cabinet headed by Prime Minister Atal Behari Vajpayee.

The cabinet suggested though that troops could be deployed should the United Nations endorse such a force, Foreign Minister Yashwant Sinha said.

"Were there to be an explicit UN mandate for the purpose, the government of India could consider the deployment of our troops in Iraq," Sinha said after the cabinet meeting ended.

"The government of India has given careful thought to the question of sending Indian troops to Iraq.

"India remains ready to respond to the urgent needs of the Iraqi people for their stability, security, political progress and economic reconstruction," he said.

Vajpayee's cabinet decided, however, to contribute to the reconstruction of the war-wrecked nation.

"The government of India is ready to consider contributing to the reconstruction of infrastructure in Iraq... and other needs of the Iraqi people," Sinha said.

"As a concrete gesture of our support to the Iraqi people, we are already planning to set up jointly with Jordan, a hospital in Najaf, in Iraq."

The US embassy in New Delhi shrugged off the decision.

"As we have said before, this was a decision for the government of India to make," an embassy release said.

"Our position has been clear on this. While we had hoped India would take a different decision, the transformation of US-India relations will continue as before. India remains an important strategic partner for the United States."

The decision ends India's vacillation over a US request to send about 17,000 troops to join a stabilisation force in Iraq, where American soldiers are now facing random attacks.

Though some of the prime minister's top aides had supported the US request, Vajpayee faced resistance from the opposition and members of his BJP-led coalition government.

In the absence of a consensus and elections looming, Vajpayee seems to be willing to risk American displeasure rather than lose politically by sending his troops to Iraq after a war that India had opposed, analysts said.

The security cabinet seemed to have discussed at length the fallout of sending troops to the region, one of India's biggest sources of petroleum imports.

"Our longer term national interest, our concern for the people of Iraq, our long-standing ties with the Gulf region as a whole as well as our growing dialogue and strengthened ties with the US have been key elements in this consideration," the statement said.

The military had also warned New Delhi against such a step, reminding the government of the losses it suffered during a 1985-1987 peacekeeping operation in Sri Lanka which was outside a UN mandate.

The cabinet meeting was also attended by Defence Minister George Fernandes, whose Samata Party (Equality Party), a key ally of India's ruling coalition, was also reluctant to commit soldiers.

Fears of Indian troops getting sucked into combat appeared to be another key reason for the decision, analysts said.

Analyst K. Subrahmanyam said the step was "carefully worded" leaving other options open.

"The US can now go back to the UN and seek a resolution which says that Iraq needs to be stabilised and therefore countries should send troops.

"Or it can try to get UN recognition for the interim governing council which was set up yesterday. Then there will be no problems and India can send troops," he said.

C. U. Bhaskar, deputy director of New Delhi's Institute of Defence Studies and Analysis, said India did not want to be seen as an "occupying force".

"The government statement is reflective of India's deep discomfort and unease with the existing arrangement."

"The lack of clarity about troops deployment and their politico-military objectives was worrying the Indian establishment," he said.

"In this context India needed an multilateral arrangement. Being seen as part of the occupying force would have been untenable for India in the context of the resolution."

WAR.WIRE