* Analysts say retaliation unlikely
* Pakistani PM calls for truce to be restored
* Two sides working to revive peace talks (Recasts with Pakistani prime minister's statement)
By Ross Colvin
NEW DELHI, Aug 8 (Reuters) - India for the first time directly accused the Pakistan army of involvement in an ambush that killed five Indian soldiers, and hinted on Thursday at retaliation for possibly the worst such attack since the neighbours signed a ceasefire in 2003.
Pakistani Prime Minister Nawaz Sharif sought later on Thursday to cool tensions between the nuclear-armed rivals, calling for the truce to be restored in the disputed territory of Kashmir and holding out the prospect of a meeting with his Indian counterpart next month.
Defence analysts said they did not expect the incident to trigger a major retaliation by India, and saw New Delhi's sharper rhetoric largely as an attempt to assuage critics at home who accuse the government of being too soft on Pakistan.
Six Indian soldiers on patrol near their base about 450 metres from the Line of Control (LoC), the de facto border dividing the Himalayan region, were ambushed early on Tuesday. Five were shot dead and one was wounded, army officials said.
"This incident will have consequences on our behaviour on the Line of Control and for our relations with Pakistan," Indian Defence Minister A.K. Antony told parliament.
"It is now clear that specialist troops of Pakistan army were involved in this attack," he said, offering the Indian government's strongest statement to date on the attack.
While tit-for-tat shelling and machinegun fire are common along the LoC, cross-border attacks by troops are rare.
Pakistan has strongly denied any involvement in the killing of the Indian soldiers.
Antony's accusation was significant as, in his first comments on the incident, he had been careful not to directly implicate the Pakistani army, referring instead to militants accompanied by "persons dressed in Pakistan army uniforms".
Prime Minister Manmohan Singh's government has been quietly working with Islamabad to relaunch stalled peace talks, possibly as early as this month.
Islamabad has also been pushing for a meeting between Singh and his new Pakistani counterpart, Nawaz Sharif, in New York in September, a proposal New Delhi has said it is considering.
Moving to ease strains, Sharif said it was "imperative" for both sides to take steps to ensure and restore the ceasefire and the Line of Control, and their commanders there should not allow the situation to escalate.
"It is incumbent upon the leadership of both sides not to allow the situation to drift and to take steps to improve the atmosphere by engaging constructively with a view to building trust and confidence," Sharif's office said in a statement.
It said Sharif was looking forward to meeting Singh on the sidelines of the U.N. General Assembly in New York to "build trust and consolidate this relationship".
Indian government officials said no decision had been taken on resuming the peace talks at a senior bureaucrat level or on the proposed meeting between the two prime ministers.
CRITICS SAY GOVT TOO SOFT
India's main opposition Bharatiya Janata Party (BJP) had accused the government of trying to play down the attack and of being too soft on Pakistan, a damaging accusation ahead of what is expected to be a closely fought election, due by next May.
"They wanted to preserve their relations with Pakistan but they ended up with egg on their faces," said Brahma Chellaney, professor of strategic studies at the Centre for Policy Research, a think-tank in New Delhi.
The BJP caused a ruckus in parliament this week, blocking efforts by the ruling party to discuss long-pending economic reforms or the government's signature initiative to hugely expand a vote-winning scheme to give cheap food to the poor.
Facing rising political heat and a paralysed parliament, the government indicated it could revise its statement after the chief of the army visited the area of the attack on Wednesday.
"We all know that nothing happens from (the) Pakistan side of the Pakistan Line of Control without support, assistance, facilitation and often, direct involvement of the Pakistan army," Antony said in his statement to parliament on Thursday.
Indian army officials have said the attack was carried out by Pakistan's Border Action Team. The unit includes members of Pakistan's commando Special Services Group and irregular forces including members of Lashkar-e-Taiba, a Pakistan-based militant group, the army officers said.
"Our restraint should not be taken for granted, nor should the capacity of armed forces and resolve of the government to uphold the sanctity of the Line of Control ever be doubted," Antony said.
C. Raja Mohan, head of strategic studes at the Observer Research Foundation, said there was more bark than bite in Antony's statement.
"Today's statement has assuaged the BJP. I don't think the prime minister will give up the opportunity to engage with Pakistan, but when the public mood sours it becomes more difficult," he said.
"I don't think that there will be a retaliation attack ... there's an interest on both sides to protect the ceasefire."
The neighbours have fought three wars since becoming independent from Britain in 1947, two of them over Kashmir.
Relations between the two neighbours have shown signs of improvement in the past year after souring in 2008 when Pakistan-based gunmen attacked India's financial capital of Mumbai, killing 166 people. (Additional reporting by Shyamantha Asokan and Anurag Kotoky in New Delhi and by Katharine Houreld and Maria Golovnina in Islamabad; Editing by John Chalmers and Andrew Roche)