Parliament on Wednesday debated tougher anti-terrorism laws and a plan to set up an FBI-style agency designed to plug gaping security holes exposed by last month's Mumbai attacks.
The legislation includes provisions allowing police to hold suspects for up to 180 days, rather than the current 90 days, and allows for a financial clampdown on suspects.
The setting up of a National Investigations Agency, styled on the US Federal Bureau of Investigation (FBI), also comes after decades of opposition from India's 29 states which had argued such a body would decrease their local law enforcement powers.
Home Minister Palaniappan Chidambaram said the government would address the "gaps in intelligence gathering and sharing," as quickly as possible.
He also proposed special nationwide anti-terror squads, regional divisions of the counter-terrorist National Security Guard, currently headquartered in the capital New Delhi.
"Each state should have a dedicated police group which focuses on prevention, investigation and prosecution of terror crimes," Chidambaram said.
The security establishment, long criticised for lacking a cohesive counter-terrorism strategy and poor intelligence gathering and analysis, came in for fierce criticism after the Mumbai attacks.
Faced with seething public anger, the federal government had apologised for the government's inability to detect the Mumbai plot.
It promised to rectify the intelligence lapses and "logistical weakness" that came to light during the 60-hour siege, which killed 172 people, including nine gunmen, and wounded nearly 300 others.
India says the gunmen were trained and sent by the Pakistan-based Lashkar-e-Taiba (LeT) militant group.
The opening of the debate comes a day after India said its peace process with Pakistan had been put on hold, and said the future of relations between the nuclear-armed South Asian rivals depended on how Pakistan responded to demands for action against the alleged plotters of the attacks.
The peace process had already been under serious strain following the bombing of the Indian embassy in Kabul in July -- which New Delhi directly blamed on Islamabad.
The two countries have fought three wars since gaining independence from Britain in 1947. They agreed on a ceasefire along their heavily militarised border in 2003, and launched a peace process the following year.
Despite the latest diplomatic freeze, defence minister said his country was not readying for war against its neighbour.
Pakistan has arrested key LeT leaders and shut down a charity accused of being a front for the group, freezing its assets and detaining dozens of members.
But it said it would not hand over any suspects to India, saying New Delhi had not yet provided any solid evidence implicating Pakistanis in the attacks.