The bombing of India's embassy in Kabul last month has cast a shadow over a peace process with Pakistan, Prime Minister Manmohan Singh said on Friday in a key speech in which he urged Islamabad to clamp down on terrorism.
India has blamed Pakistan's spy agency for the July 7 attack in which two Indian diplomats were among 58 people killed. Pakistan has denied any involvement.
Singh's speech to mark independence day was the latest salvo in a war of words with Pakistan, sparking fears that a tentative peace process between the nuclear rivals may unravel after the Kabul bombing, border shootings and the upheaval in Kashmir.
On Friday, India said border guards were fired on with rockets and machine guns from across the border in Kashmir, one of several incidents in recent weeks.
Addressing a huge gathering from the ramparts of New Delhi's historic Red Fort, Singh said Pakistan must clamp down on terrorism.
"If this issue of terrorism is not addressed, all the good intentions that we have for our two peoples to live in peace and harmony will be negated," Singh said.
"We will not be able to pursue the peace initiatives we want to take."
Pakistan's foreign ministry said they were keen to continue the peace process. "We have an interest in the peace process. We think it's good for the people of South Asia," Mohammad Sadiq, a spokesman said in response to Singh's comment.
Snipers kept a close watch from high-rise buildings as Singh unfurled the national flag at the Red Fort to a 21-gun salute.
The Prime Minister admitted that the peace process between the two countries was in trouble and that the Kabul blast had cast a shadow over efforts to normalise relations with Pakistan.
"I have personally conveyed my concern and disappointment to the government of Pakistan," said Singh, marking the 61st anniversary of independence from British rule.
He also called for peace in troubled Indian Kashmir, which has seen its worst protests in recent days since a separatist revolt against New Delhi broke out in the region 20 years ago.
Late on Friday, police opened fire on thousands of protesters in Srinagar, wounding at least 21 of them, police said.
Troops have already shot dead 22 people this week, resulting in a general strike called by the region's main separatist alliance.
India has been angered by calls in Pakistan for United Nations intervention in Kashmir, saying Islamabad was interfering in its internal affairs.
CALL FOR PERMANENT SOLUTION
At least 27 people have been killed since June in Kahsmir. The trouble began when the government promised to give forest land to a trust that runs Amarnath, a cave shrine visited by Hindu pilgrims. It backtracked after huge protests by Muslims, in turn angering Hindus in the Jammu region of the state.
"In this hour of crisis, divisive politics will lead us nowhere," Singh said.
The prime minister also said India's soaring inflation was due to external factors but authorities were taking steps to insulate the poor against its worst effects.
"But in taking these steps we need to keep in mind that we do not do anything which hurts the growth rate," Singh said.
Annual inflation is running at 12.4 percent, its highest since the current index became available in 1995.
India rolled out a security clampdown on Friday following recent bomb attacks in some of its cities and the turmoil in Kashmir.
Security forces are on their highest alert across the country to prevent attacks from separatist militants or Maoist rebels.
Maoists operate in large areas of south and east India and Singh has said in the past that the militants are the biggest security threat to the country.
(Additional reporting by Sheikh Mushtaq in Srinagar, Ashok
Pahalwan in Jammu and Surojit Gupta in New Delhi and Robert Birsel in Islamabad)