Mr Vajpayee spoke from behind bullet-proof glass

In a rare overture to Pakistan, Mr Vajpayee said earlier on Friday that dialogue was the only way to bring peace in Kashmir.

Mr Jamali was swift to welcome the call, saying it was a "positive development".

Our correspondent in Islamabad, Zaffar Abbas, says the two leaders are hoping to cool off tempers following a series of highly provocative statements from both sides.

Guns will not solve the matter but brotherhood will Prime Minister Atal Behari Vajpayee

"Pakistan's stand remains the same. But once talks start there... could be flexibility from both sides," Mr Jamali told reporters in Islamabad.

Mr Vajpayee was addressing a public rally in Srinagar in Indian-administered Kashmir - the first prime minister to do so in 16 years.

Delhi has consistently said it will hold talks with Pakistan only after Islamabad stops alleged support for Muslim militants fighting Indian rule in Kashmir.

Our correspondent says it is too early to say whether Friday's public statements will lead to an early resumption of talks between the two countries.

Tight security

The Srinagar rally was held amid tight security in the disputed state's summer capital, where a protest strike by separatists had closed most of the city.

Thousands of police and paramilitary troopers took up positions around the sports stadium which held Mr Vajpayee's rally.

Security forces are on high alert in Srinagar

"We have come to share your pain and grief," the prime minister told 20,000 people gathered inside, many of them bussed in by the authorities.

Mr Vajpayee said he wanted to extend the hand of friendship to Pakistan - provided Islamabad reciprocated.

"Guns will not solve the matter but brotherhood will," he said from behind bullet-proof glass.

"It has to be a two-way road. Both sides should decide to live together."

Mr Vajpayee also promised to provide more jobs and assistance for the Kashmiri people and said he was fully behind the state's new government.

Leaders in India and Pakistan must realise that they have to do something about Kashmir between themselves Moulvi Mohammad Abbas Ansari Separatist leader

The new administration of Mufti Mohammad Sayeed won office by promising to fight separatism by improving living conditions.

But the BBC's Altaf Hussein in Srinagar says the prime minister had little concrete to offer to people at the rally, most of whom expected him to announce an economic package for the state.

Opposition

The prime minister's two-day visit is being opposed by separatists, some of whom have questioned whether Mr Vajpayee will change his government's "hardline policy" on Kashmir.

They want the government to begin peace talks with them - something Delhi has refused to do.

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The chairman of the main separatist alliance, the Hurriyat Conference, said Mr Vajpayee had offered nothing specific to resolve the dispute.

"He talked of the garden, he talked of the spring. But he did not talk of the birds that are in pain," Abdul Gani Bhat said.

Soon after his arrival in Kashmir, Mr Vajpayee laid the foundation stone for a $9.5m expansion project at Srinagar airport.

He is also scheduled to inaugurate a four-lane national highway project besides a bridge along the proposed Qazigund-Baramullah railway line.