Angry opposition MPs have paralysed the Indian parliament in protest over the government's response to Tuesday's killing of five soldiers in Indian-administered Kashmir.
The opposition BJP has demanded that PM Manmohan Singh cancel a meeting with his Pakistani counterpart in September.
The government says it does not want to "create a situation that is detrimental for India's security and peace".
The two sides have again exchanged fire on Wednesday, reports say.
Pakistan said two of its soldiers were injured in "unprovoked firing by Indian troops" along the Line of Control (LoC) that divides Kashmir.
Indian army sources in response accused Pakistan of ceasefire violations - they told the BBC that Pakistani troops had fired at various posts in the Uri sector of the Jammu region.
Indian troops retaliated but did not suffer any losses, they said.
In a bid to de-escalate tensions, senior army commanders on both sides spoke over a special hotline on Wednesday, reports said.
On Tuesday, the army said Pakistani troops had "ambushed" a patrol in Poonch and killed five soldiers.
Pakistan's army denied the charge. A Pakistani military official told the BBC that "no fire took place" from their side and that the Indian allegations were "baseless".
Meanwhile, authorities in India's Bihar state have announced state funerals for soldiers killed in the attack.
Claimed by both countries, Kashmir has been a flashpoint for over 60 years.
'No time for talks'
On Wednesday, angry MPs demanded an apology from Defence Minister AK Antony for his "laughable" statement on Tuesday in relation to the attack in parliament.
The minister had said the "ambush was carried out by approximately 20 heavily-armed terrorists along with persons dressed in Pakistan army uniforms".
Opposition parties said his statement "absolved the Pakistani army" from the attack.
Senior member of the main opposition Bharatiya Janata Party Sushma Swaraj told the parliament that the defence minister had given Pakistan a "clean chit" by his statement.
Several opposition leaders have also demanded that India cancel peace talks with Pakistan, due to resume later this month with senior BJP leader LK Advani telling lawmakers that "this is no time for talks".
The government, however, says it is keen to engage with Pakistan and Foreign Minister Salman Khurshid told the Press Trust of India news agency that the government did not "want to throw the baby out with the bath water".
The prime minister has met senior BJP leaders to explain the government stand on the issue.
Meanwhile, hundreds of people have protested in Delhi, Mumbai and other cities against Tuesday's killings.
India on Tuesday said it had "lodged a strong protest with the government of Pakistan through diplomatic channels".
The two sides agreed a ceasefire along the LoC in November 2003.
But both have blamed each other for occasional cross-border firing which have resulted in several soldiers and civilians being killed or wounded.
In January, several deadly cross-border attacks plunged the neighbours into the worst crisis in relations in years.
After three Pakistani and two Indian soldiers were killed in exchanges along the LoC, relations deteriorated so sharply that there were fears that the fledgling peace process could unravel.
Thousands of people have been killed in Indian-administered Kashmir since an armed revolt against Indian rule erupted in 1989.