A Pakistani boat which was intercepted by the Indian Coast Guard on New Year's Eve was carrying "suspected terrorists", India's Defence Minister Manohar Parrikar has said.
Delhi claims that the Pakistani crew were engaged in "illicit activities" and blew up the boat to escape arrest.
Pakistan has denied this, saying it had no information suggesting that one of its boats had been destroyed.
Tensions between the neighbours have escalated over the past year.
Last week, Indian forces in Kashmir killed four Pakistani troops on the international border after an Indian soldier was killed in an attack blamed on Pakistan. Pakistan said it had lodged a protest with the Indian high commissioner in Islamabad.
India's defence ministry had earlier said in a statement that Coast Guard ships and aircraft had intercepted a "suspect" fishing boat on the night on 31 December near the maritime boundary of the two countries, some 365km (226 miles) from the city of Porbander in the western Indian state of Gujarat.
This followed intelligence that the vessel from "Keti Bunder near Karachi was planning some illicit transaction in Arabian Sea".
The crew "set the boat on fire, which resulted in explosion and major fire on the boat" after the Coast Guard ship managed to stop the vessel after nearly an hour-long chase, the statement said.
Four persons had been spotted on the boat, but they - and the vessel - could not be rescued "due to darkness, bad weather and strong winds".
There have been reports in the Indian media that the vessel was carrying smugglers with contraband goods. Questions have also been raised about the Indian version of events.
"I will not be part of speculation," Mr Parrikar told reporters on Monday.
However, he said, "circumstantial evidence" pointed to the boat having a "suspected terror link".
Mr Parrikar said the boat was intercepted in an area which was "not the normal sea route for fishing boats" and even "the smugglers take the busy route so that they can mingle with [other] boats".
He said he thought the occupants of the boat were "suspected or possible terrorists" because they had "committed suicide" when challenged, and had been in touch with Pakistani maritime officials.
Pakistan has not yet reacted to Mr Parrikar's remarks.