The allegations are bound to seriously damage the fast expanding soft drinks market in India, which sells 6.5 bn bottles a year.

The chemicals identified - including DDT, which is banned in Europe and the US - are blamed for birth defects and cancer.

In a display of unity, MPs from both the ruling coalition and the opposition called for further investigations after the report by the independent New Delhi-based Centre for Science and Environment (CSE).

The health minister, Sushma Swaraj, said the findings were startling, and the government had ordered a comprehensive investigation. "I will collect all the facts and come back to the House," he told MPs.

Both Coca-Cola and Pepsi strenuously denied the claims. They said the report was "baseless".

The tests were conducted by CSE's pollution monitoring laboratory in New Delhi, on bottles of drinks allegedly bought in the Indian capital.

The laboratory said it acquired bottles of Pepsi and Coca-Cola manufactured in the United States, where strict controls are enforced, and using identical testing methods, found no residues.

Coca-Cola and Pepsi in India have a virtual monopoly and market 12 brands aggressively to the growing numbers of middle and upper class children who can afford them.

These brands, Pepsi, Mountain Dew, Diet Pepsi, Mirinda orange, Mirinda lemon, Blue Pepsi, 7-Up, Coca-Cola, Fanta, Limca, Sprite and Thums Up contain 86% to 90% water.

They were dubbed toxic yesterday by Down to Earth, the CSE's magazine.

CSE said it tested the drinks for organochlorine and organophosphorus pesticides and synthetic pyrethroids - all commonly used in India as insecticides. It claimed that all samples contained residues of four extremely toxic pesticides and insecticides: lindane, DDT, malathion and chlorpyrifos. In all samples, the claimed levels of pesticide residues far exceeded the EU's maximum residue limit for pesticides in drinking water.

Down to Earth claimed that "each sample had enough poison to cause, in the long term, cancer, damage to the nervous and reproductive systems, birth defects and severe disruption of the immune system."

Coca-Cola and Pepsi, the two leading brands, had almost similar concentrations of residues.

Soft drinks have been exempted from India's food regulations.

Down to Earth said: "It is clear that the regulations have been designed in total disregard for public health."

After the allegations were published the two companies came together for a rare joint news conference.

Rajeev Bakshi, Pepsi India's chief executive, told reporters: "The report is baseless. We conform to the best international norms. We're open to our product being tested anywhere in the world by an independent and accredited laboratory." Sanjiv Gupta, president of Coca-Cola India, said: "We test our brands very regularly in top-grade laboratories in India and abroad," he said.

The laboratory decided to do the tests on locally marketed soft drinks after bottled water sold in India was found to contain toxic residues.