Salaries and pensions remitted by India's Ministry of Defence have traditionally provided a steady source of income for soldiers' families otherwise unthinkable in this backward and predominantly agricultural land.

Ex-servicemen and their dependants are also entitled to free treatment in Indian military hospitals.

But Prachanda recently branded Gurkhas donning Indian battle fatigues mercenaries, and vowed to stamp out what he described as a terribly shameful and humiliating practice that no self-respecting Nepali would tolerate.

He has promised to provide prospective soldiers jobs at home.

'Why should Nepali citizens protect other nations? It reeks of colonialism,' added C.P. Gajurel, head of the international department of the ruling Communist Party of Nepal (Maoist).

But a fuming Deepak Bahadur Gurung, chairman of the Nepal Ex-Servicemen's Association (NESA), said: 'Gurkha warriors have faced many different types of enemies in their illustrious history but no enemy has stooped so low as our own rulers.

'They have resorted to underhand tactics. But does the government think that we will take it lying down?' he asked. 'Nepal will be plunged into a civil war if Maoists don't withdraw the diktat forbidding young men from signing up with the Indian military.'

Some analysts believe that Gurkhas are not the real target of the Maoist diktat, and that the anti-recruitment campaign is a smokescreen for changing the rules of engagement with India.

Maoists accuse New Delhi of treating Nepal as a subordinate nation instead of a South Asian partner.

'The threat to stop India from enrolling Gurkhas is a pressure tactic to bring New Delhi to the negotiating table to sort out several other contentious pending bilateral issues, particularly a grossly unequal treaty signed with India in 1950, besides transit disputes the small, landlocked country is getting increasingly impatient to resolve in its favour,' said Rajat Roy, a Calcutta-based commentator.

But Gurkha organisations like NESA said they could not afford to take the diktat lightly, irrespective of their government's real intentions.

'There is too much at stake. Even if we believe that we are being used as pawns, we will not rest until the decree is revoked,' said Mr Gurung.

Last month, hundreds of ex-soldiers marched in the streets of Kathmandu holding banners that read 'Gurkha recruitment must continue' and 'Gurkha recruitment not shameful, it is an honour'.

The protestors brandished their trademark weapon, the khukri - a 46cm-long curved knife traditionally used by Gurkhas with devastating effect in hand-to-hand combat.

Newspaper reports quoted a demonstrator as saying: 'There are no employment opportunities here [in Nepal] and the Maoists are trying to snatch one of our most honourable means of livelihood.'

Remittances from Gurkhas and the other 2 million Nepalis working abroad account for more than US$1.1 billion every year in a country where the average annual income is US$300.

Their numbers in the British army have fallen sharply from a second world war peak of 112,000 men, and now stand at about 3,000.

However, they are an integral part of the Indian army, particularly the infantry, and paramilitary bodies like the Border Security Force, the Indo-Tibetan Border Police and the Central Reserve Police Force.

'Gurkhas are not only prized foot soldiers who fought valiantly against China and Pakistan in all the four major wars India has fought since its independence in 1947. Ex-servicemen with professional and emotional ties with India are a huge asset for New Delhi in a country inching closer to China under the Maoists,' said Indranil Banerjie, executive director of Security and Political Risk Analysis India Foundation, an independent, Delhi-based think-tank.

'India has not officially reacted to the Maoist diktat but Prime Minister Manmohan Singh's government is worried. Technically, the army and para-military organisations can recruit from Nepalis living in India as they are from the same racial stock. But India's influence in Nepal would be sharply reduced if the Maoists stop India from recruiting there. It's also a question of India's prestige in its own backyard.'

Last year India paid pensions worth over 5 billion rupees (HK$800 million) to 120,000 retired Gurkha servicemen - 90,000 of them from the army - in Nepal. Numerically, Gurkhas in the Indian armed forces add up to two-thirds of the strength of Nepal's 90,000-strong army.

But India is evidently uneasy about where the new Maoist-led republic is heading.

After coming to power, Prachanda and Maoist ideologues loyal to him have frequently demanded 'revolutionary changes' and a 'new era' in bilateral ties.

New Delhi was stunned when Prachanda calculatingly broke long-standing protocol by making Beijing his first international stop after taking office in August. After threatening to shut down the Indian army's recruitment centres on Nepalese soil, he dealt another major blow to the giant neighbour by sacking Indian priests from two of Nepal's holiest Hindu shrines, breaking a 261-year-old tradition. To add insult to injury, the Indian priests were accused of pocketing cash donations.

Following protests they were reinstated temporarily, but Maoists have made it abundantly clear that they will ultimately be replaced by Nepali priests whether India likes it or not.

The average annual income in Nepal, a small landlocked country in South Asia, in US dollars, is: $300

Remittances every year from Gurkhas and other Nepalis working abroad, in US dollars, exceed: $1.1b

India paid pensions last year to 120,000 retired Gurkha servicemen totalling more than 5 billion rupees or, in US dollars, $102m