By Krittivas Mukherjee

NEW DELHI, July 8 (Reuters) - The bombing of the Indian embassy in Kabul highlights the dangers of India's growing role in Afghanistan, whether from the Taliban or a Pakistan worried about ceding strategic space to its nuclear-armed rival.

The suicide car bomb on Monday that killed 41 people, including an Indian defence attache and a diplomat, was blamed by Afghan authorities on a regional intelligence service, a likely reference to Pakistan.

Both Pakistan and the Taliban have denied a hand in the attack that analysts say not only challenges the effectiveness of international security operations in Afghanistan, but carries a more specific message for India.

"The gloves are off. The attack is telling India to get out or scale down its activities in Afghanistan," Ashok Mehta, a retired Indian army commander and defence expert, told Reuters.

"It underlines the dangers India will face in helping in the reconstruction process because every positive act by India undermines the efforts of Taliban and their backers."

India and Afghanistan share close ties and New Delhi is involved in reconstruction projects worth hundreds of millions of dollars there, angering the Taliban who attack Indian workers. Two have been taken hostage and found killed since 2005.

Analysts also say that as India widens its reach in the region -- building an air base in Tajikistan and helping build highways linking Afghanistan with Central Asia to access ports there -- Pakistan watches warily.

The Afghan government has hinted at Pakistan being behind the bombing, a suspicion echoed across India's media on Tuesday.

"The increasing Indian presence in Afghanistan to assist in its economic development has been a constant source of criticism by Pakistan," The Hindustan Times said in one report.

"Pakistan thus has a strong motive to target Indian nationals and interests in Afghanistan through surrogate Taliban."

The attack was also seen as a symbol of India and Pakistan's competitive relations in Afghanistan and a manifestation of the anger of Islamist groups at India's cultural impact on Afghanistan, where many people now watch Bollywood hits on DVD and Hindi language TV soaps on cable.

"India is seen as making an effort to bring change in Afghanistan -- physical changes through roads, hospitals, schools and even through its soft power like Bollywood films and music," Indian strategic analyst Uday Bhaskar said.

"Afghans are linking India with positive aspects while Pakistan's involvement in the region are spoken of largely in respect of violence and negativity."

STAY THE COURSE

Pakistan, the Taliban's main backer until Islamabad sided with Washington after the Sept. 11, 2001, attacks, has been uneasy about increased Indian influence in Afghanistan since then and is accused of lending covert support to Islamist forces.

"Pakistan fears India is encircling it," Mehta said. "And Pakistan is desperate for its strategic depth in Afghanistan."

For India and Pakistan, the stakes are high in the turbulent politics of the region, which date back to the Cold War era.

New Delhi was a major non-communist Cold War ally of the former Soviet Union, while its foe Pakistan was then a strategic ally of the United States, which played a key role in dislodging Soviet troops from Afghanistan.

After the end of the Cold War, both Islamabad and New Delhi realised the strategic importance of Afghanistan, with India's main worry being the possibility of an Islamic surge in a region with traditional ties to Pakistan.

New Delhi has pledged $750 million in the war-torn country's reconstruction, hoping the ties will help it retain strategic space and further its economic interests as well.

Islamabad has not allowed overland transit for Indian goods bound for Afghanistan and further on to Central Asia, hampering trade. This has forced India to route trade through Bandar Abbas port in Iran and onward by a long, overland link.

Many experts said India had too much at stake to waver from its course in Afghanistan, a view echoed in most Indian newspapers.

"It has a strong interest in building a stable Afghanistan that is freed of the scourge of Islamist terror," the Times of India said.

"As India becomes a bigger player in the region and the world it must factor in the possibility of attacks on its interests abroad, such as Americans and Europeans are now familiar with." (Editing by Jerry Norton)

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