Indian intelligence agencies received no warnings before the three bomb blasts that killed 18 people in Mumbai on Wednesday, the Times of India reports.
The attack is the biggest attack since Pakistani-based militants rampaged through the financial hub in 2008.
Suspicion, however, has fallen on the Indian Mujahideen, a shadowy home-grown terror group known for its city-to-city bombing campaigns using small explosive devices planted in restaurants, at bus stops and on busy streets.
"There was no intelligence regarding a militant attack in Mumbai. That is not a failure of intelligence agencies," Home Minister Palaniappan Chidambaram told reporters.
"[We] know that perpetrators have attacked and have worked in a very, very clandestine manner. Maybe it's a very small group, maybe they did not communicate with each other."
Chidambaram said it was too early to point the finger at a particular group, but said the "coordinated terror attacks" could be in retaliation to a number of plots recently foiled by police or arrests, including from the Indian Mujahideen.
The Indian Mujahideen have been accused of ties to Pakistani terror groups involved in attacks in Indian Kashmir, as well as elsewhere in the country.
The bombings were the biggest attacks on Mumbai since the 2008 attacks killed 166 people, including Chabad emmisaries Gavriel and Rivka Holtzberg, which raised tensions with neighbour and nuclear rival Pakistan, and left a city on edge.
The blasts come as India and Pakistan seek to normalize ties. Pakistani leaders were swift in condemning the bombings, as was US President Barack Obama.
There was no immediate indication any Pakistani group was involved. But any suggestion of attributing blame to Islamabad would complicate a fraught relationship with India -- with whom it has a long-running dispute over Kashmir -- and further unravel ties with the United States.
"We live in the most troubled neighbourhood in the world. Pakistan and Afghanistan are the epicentre of terrorism," said Chidambaram, adding that Pakistan had still not given India support in pursuing those behind the 2008 attacks in Mumbai.
Home Grown Groups?
The Indian government's main opposition, the Hindu nationalist Bharatiya Janata Party, blamed the government for its laxness towards security.
"These repeated attacks on Bombay should be viewed as a policy failure. It is not an intelligence failure," top BJP leader L.K. Advani, a former deputy prime minister, said.
There has so far not been any claim of responsibility for the bombs, which were mixed with ammonium nitrate, a chemical compound often used in improved explosive devices (IEDs).
"It's very likely coordinated by Indian Mujahideen looking at the severity and scale of the attacks -- in the past they've used tiffin carrier bombs and IEDs," said Rohan Gunaratna, a Singapore-based al-Qaeda expert.
"Certainly there can be links between those who have done these attacks and overseas sources but the attacks themselves have been conducted by local groups, home grown Indian groups."
Chidambaram said 18 people had died in the attacks, lowering an earlier figure of 21. He said 23 out of the 131 wounded and admitted to hospitals were in a critical state.
The blasts came as beleaguered Prime Minister Manmohan Singh struggles to get past a series of corruption scandals and a resurgent opposition that has led to policy paralysis in Asia's third largest economy. A cabinet reshuffle this week was criticised as too little, too late.