The crew of a Pakistani fishing boat blew up and sank their vessel after trying to evade capture at the hands of the Indian navy in a high-speed chase at sea, officials said Friday.

All four people on board the vessel from near the Pakistani port city of Karachi are believed to have been killed in the dramatic episode in the Arabian Sea on New Year's Eve, according to India's defence ministry.

Indian Coast Guard ships and aircraft tried to intercept the boat near the maritime border with Pakistan, around 365 kilometres (225 miles) from the coastal state of Gujarat, following an intelligence tip-off.

"However, the boat increased speed and tried to escape away from the Indian side of maritime boundary. The hot pursuit continued for nearly one hour," a defence ministry statement added.

Although the boat did eventually stop after warning shots were fired, the four-man crew then hid themselves below deck before setting the boat on fire which triggered a large explosion.

"Due to darkness, bad weather and strong winds, the boat and persons on board could not be saved or recovered. The boat burnt and sank in the same position, in early hours of January 1," said the statement.

Although the defence ministry would only say that the crew were planning "some illicit transaction", it also stated that the boat was carrying explosives.

The incident has evoked memories of the 2008 Mumbai attacks when Pakistani militants managed to sneak into India's financial capital by sea and then began a 60-hour siege of India's economic capital that left 166 people dead.

India reacted furiously last month to a Pakistani court's decision to grant bail to the alleged mastermind of the Mumbai attacks, although he has since been detained again.

India's ruling Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi termed the latest incident a "possible terror operation".

"The coast guard has foiled attempts of a suspected terror boat that was actually spotted near the Indo-Pak maritime border," BJP spokesman GVL Narasimha Rao told NDTV news channel.

"Possibly this was yet another attempt to sneak terrorists into the Indian territory," he added.

The Indian coast guard ruled out the explosion being an accident, saying the men on the boat sped away because they were hiding "something really serious".

"If they weren't doing anything wrong, then they had no reason to run, to set the boat on fire. Why would anyone set (themselves) on fire?" said K.R. Nautiyal, Deputy Inspector General of the Indian Coast Guard.

India has fought three wars with nuclear-armed rival Pakistan, two of them over the disputed Himalayan territory of Kashmir.