India says peace process with Pakistan under stress

NEW DELHI (Reuters) - India's foreign secretary said on Monday the peace process with Pakistan was strained because its nuclear-armed foe was "inciting terror" inside India and trying to hit its interests abroad.

Pakistan quickly rejected the charge and said peace talks were "on track" but India was pointing an accusing finger at Islamabad without any evidence.

India's comments, one of the sharpest exchanges between the two sides since they launched peace talks in 2004, came after a bombing in Kabul that killed 58 people, including two Indian diplomats.

"Unfortunately certain incidents in recent past have vitiated the atmosphere between India and Pakistan. The dialogue process is under stress," Foreign Secretary Shivshankar Menon told reporters after an intense meeting between top foreign officials in New Delhi.

"There have been statements by leaders of Pakistan, inciting terror," he said.

"There are such statements from some government officials and this incitement of violence has culminated in suicide blasts in our embassy in Kabul," he said. "All investigations point to Pakistan being behind the blast."

Pakistan Foreign Secretary Salman Bashir said the accusations were baseless adding that Menon refused to specify India's basis for the accusations

"He (Menon) did not feel the need to share the information," Bashir said.

"But of course if there is such information we are prepared to look at it very carefully ... because we feel really that these are baseless accusations."

Bashir said there were points of contention in the peace process but they were momentary.

"I would not like to characterize the status of our dialogue in the manner it has been described to you." Bashir said in response to a question. "I think the dialogue is very much on track."

India last week blamed Pakistan's intelligence service for a suicide car-bomb attack in Kabul. It also reported this month cross-border firing on the line of control between India and Pakistan-controlled Kashmir.

India accuses Pakistan of backing a two-decade-old separatist revolt in Kashmir, which both sides claim in full but rule in part, and of trying to hit Indian interests abroad.

For its part, Pakistan suspects Indian involvement in a low level insurgency in the western province of Baluchistan and trouble in the Pashtun tribal region on the Afghan border

While ties had been warming since the start of the peace process, after the countries came close to a fourth war, there has been little progress in their main dispute over Kashmir. Both suspect each other's involvement in revolts in border areas.

"I think it is important, it is imperative that we refrain from what's called the blame game, we have played it for too long," Bashir said, calling for grievances on both sides to be aired in their "anti-terrorism mechanism" meetings.

Despite the trading of charges, the two sides agreed on several confidence building measures, including opening up of new border crossings, increasing the frequency of a bus service and on more trade.

They also agreed on a meeting between their foreign ministers in Colombo next month.

(Additional reporting by C.K. Nayak; Editing by Bappa Majumdar)