Maoist rebels killed at least 73 police by setting off explosives and firing from hilltops around dense forest in central India on Tuesday in one of the worst attacks by the insurgents in years.
The ambush in Chhattisgarh state highlights the strong Maoist presence in large swathes of India, especially remote rural areas, and underscores how many parts of the country have been left out of India's booming economy.
"Something has gone very wrong," Indian Home Minister P. Chidambaram said. "They seem to have walked into a camp or a trap."
Recent high profile rebel attacks on police have raised questions over how well prepared India's security forces are to tackle the Maoists, especially during a counter-offensive by security forces this year.
"We have confirmation of 73 deaths in the attack. At least two dozen have been injured," Amresh Mishra, a senior police officer, told Reuters.
Reinforcements trying to collect the dead bodies came under fire by the Maoists who have surrounded the area.
The Maoists regularly attack railway lines and factories, aiming to cripple economic activity in many of the mineral rich and remote mining regions of India. But they have made few inroads into cities.
The Congress-led government has come under criticism by the opposition for failing to deal with the insurgents and the security issue could be important in several state elections over the next two years.
Prime Minister Manmohan Singh has described the Maoists as the gravest threat to India's internal security.
The rebels number between 6000 and 8000 hardcore fighters in nearly a third of the country's 630 districts. Each year they extort more than $US300 million ($NZ427.72 million) from companies, the government says.
Tuesday's attack echoed a similar ambush in February, when Maoists caught police offguard in a daylight attack on in the state of West Bengal, killing at least two dozen police.
Maoists have stepped up attacks in response to a police offensive that began late last year in several states, which Indian officials say has for the first time weakened the decades-old movement.
Maoists, who say they are fighting for the rights of poor farmers and landless labourers, are trying to expand their influence in east, central and southern India.
Thousands have been killed in the insurgency which began in the late 1960s.
On Sunday, rebels triggered a landmine blast that killed ten police in the mineral-rich eastern state of Orissa.