GUWAHATI, India (Reuters) - Riot police fired tear gas to scatter demonstrators in India's northeast on Tuesday as fresh trouble erupted after the death of two people protesting against an anti-terror law.

The new violence came in response to a call by Apunba Lup, an umbrella organisation of 32 groups in the state of Manipur, for an indefinite strike and a boycott of Indian goods until the controversial law is completely scrapped.

"The situation in Manipur is getting worse day by day," a senior police officer in Imphal, the state capital, told Reuters by telephone. He said heavily armed troops were patrolling the city's deserted streets as offices, schools and markets shut.

Authorities have imposed curfew on several towns in the remote state that borders Myanmar, he added.

The trouble was sparked by the deaths of a man and woman on Monday from injuries suffered in protests against the Armed Forces Special Powers Act, which gives troops the right to arrest and shoot at suspected rebels.

One of the two, Pabam Chittaranjan, a 32-year-old student leader, died of burns suffered when he set himself on fire in a deserted market on Sunday.

"It is better to self-immolate than to die at the hands of the security forces under the act," Chittaranjan said in a note before his immolation attempt. "With this conviction, I am marching ahead of the people as a human torch." The other dead protester was a woman, who was injured when police fired rubber bullets to break up protests last week.

DECADES OF REVOLT

The people of Manipur, whose name means a land of jewels, took to the streets more than a month ago after a 30-year-old woman was killed by troops who suspected her of involvement in a revolt that has plagued the state for decades.

Protesters called the killing the latest example of the abuse of the anti-terror law.

The state government of Manipur lifted the law partially by scrapping it in Imphal and some surrounding areas last week but the move failed to stop protests.

In New Delhi, Home Minister Shivraj Patil told parliament the federal government was watching the situation and would take appropriate action to meet it.

He gave no details but Home Ministry sources said the action could include dismissing the Manipur government and placing the state under direct federal rule.

Security agencies say the anti-terror law in force in all seven northeast Indian states, is needed to put down more than 20 insurgent groups that operate in Manipur.

Dozens of rebel groups operate elsewhere in the northeast.

One of them, the United Liberation Front of Asom (ULFA), claimed responsibility for a bomb blast on Sunday that killed 22 people, mostly women and children, in the town of Dhemaji in the state of Assam, hundreds of miles northwest of Manipur.

A statement from ULFA said the Assam administration had used the children as "shields" at a school ceremony to mark the anniversary of India's independence from British colonial rule. The rebels had urged people to boycott the event.

"Nobody except the administration is responsible for the tragedy," ULFA Chairman Arabinda Rajkhowa said in the statement.

(Additional reporting by Y.P. Rajesh in NEW DELHI)

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