``The US regrets this missile test and calls on both Pakistan and India to exercise restraint,''State Department spokesman James Foley said yesterday after the intermediate range ballistic missile with capable of carrying nuclear warhead and penetrating deep into India.

``In terms of the issue of regional stability, the US has long believed that the development or acquisition of ballistic missiles by Pakistan or India would be destabilising and undermine the security of both countries,'' he said.

``At this juncture, with a new Indian government assuming power and renewed hopes that India and Pakistan can enter into a productive bilateral dialogue,''Folley said, ``we believe it is especially important to avoid steps in the nuclear andmissile areas that could be seen as provocative and could adversely affect the political and security environment in the region.''

Stating that it test fired the missile yesterday due to the country's ``threat perception'' of India's missile programme and Bharatiya Janata Party government's nuclear policy, Pakistan yesterday said the development would not hamper its dialogue process with India.

Reiterating the US plea to India and Pakistan to continue the dialogue process, Foley said, ``we have made an appeal today from this podium for both sides to follow through on their recommitment to dialogue and include security matters in the dialogue.''

American Ambassador to the United Nations Bill Richardson will talk to India and Pakistan on this issue when he visits the two countries this month accompanied by Assistant Secretary of State for South Asia Karl Iderfurth and National Security Council Director for the region Bruce Riedel, he said.On the underlying factors behind test firing of the missile, theState Department spokesman said, ``the two countries tend to make decisions on the basis of worse case assumptions and suspicions about each other.''

``The US believes that it is the problem of long-standing tensions and suspicions that have long existed between India and Pakistan that strongly influence both countries' decision-making on what they see as issues of vital national security interests,'' he said.

Asked whether the size of the missile and the distance it can travel came as a surprise to Washington, he said: ``My understanding is, probably not.''