The announcement came after demands by a regional ally of premier Manmohan Singh's ruling Congress party, which also governs Kashmir, to reduce troop numbers in the Himalayan region.

"The panel would be a professional body ... to determine whether there is need to relocate and reconfigure security forces (in Kashmir)," Singh's office said.

"While making its determination, the panel should ensure that cardinal aspects of security are not compromised in any manner," it said in a statement.

The panel would also review the use of a draconian military law that gives sweeping powers to soldiers battling the Islamic insurgency in Kashmir, which according to official figures has claimed more than 42,000 lives since its launch in 1989, it added.

Mufti Mohammed Sayeed's People's Democratic Party (PDP) has threatened to withdraw its support if Delhi rejects its demands for troop cuts by mid-year.

India has deployed an estimated half a million troops and paramilitary soldiers in Kashmir, the subject of two of the three wars between India and Pakistan since their 1947 independence from the British.