Supporters of Mr Singh's Congress party in Jammu for his address

He was speaking at a rally on his first trip to Indian-administered Kashmir since becoming prime minister.

More than 40,000 people have died in the region since an armed insurgency began in 1989.

On Wednesday India pulled withdrew some 1,000 troops out of Kashmir in the light of improved security.

'Misled youth'

"Those who want to meet their political ends through terrorism, I want to tell them they will not succeed through this route," Mr Singh told a public meeting in Kashmir's winter capital, Jammu.

He repeated his offer that his government was ready for talks with any group that rejected violence.

"Time has come for the misled youth to come back to the mainstream of politics by eschewing violence... Our doors are open for everyone. We invite you without any preconditions," he said.

However, moderates in the All Party Hurriyat Conference, which is campaigning for independence from India, say they want clarification of his remarks.

Earlier this year talks broke down with the central government insisting they had to be held within the framework of the Indian constitution which enshrines Kashmir as part of India.

Mr Singh also visited a refugee camp for Hindus displaced by the fighting between Indian forces and separatists.

Thaw

Mr Singh said on Wednesday that Delhi would not accept any redrawing of borders in the disputed region, one of the proposals suggested recently by Pakistani President Pervez Musharraf.

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But he said after his Srinagar rally that India was prepared to look at President Musharraf's other proposals, although he added that they were still not clear.

He said: "I have made it clear to President Musharraf that any redrawing of the international border is not acceptable to us. Any proposal which smacks of further division is not going to be acceptable to us."

India would like to see the Line of Control that currently divides the region become an accepted international boundary, while Pakistan, and Kashmiri activists, reject this.

They argue the majority-Muslim Kashmir Valley should not stay part of India.

The current discussions about Kashmir are the result of thawing relations between India and Pakistan that have prompted a search for new solutions.

The search continues next week when Pakistani Prime Minister Shaukat Aziz makes his first visit to India.

President Musharraf's options for a settlement last month included making the whole area demilitarised and autonomous, putting it under the joint control of the two countries or dividing some parts between the two countries.

Development package

On arriving in Kashmir, Mr Singh said he had been able to order a troop withdrawal because of the improvement in the security situation in Kashmir.

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A first unit of about 1,000 soldiers withdrew from the southern town of Anantnag early on Wednesday, witnesses said.

It remains unclear how many soldiers India plans to pull out. Further withdrawals would depend on reduced militant activity by separatists, Mr Singh said.

India is estimated to have between 180,000 to 350,000 soldiers in the state.

In Srinagar, Mr Singh announced a $5bn, four-year development package including two power projects, investment in education and plans to upgrade Srinagar airport.

He said the new package was expected to create 24,000 new jobs, including 14,000 for women.