Pakistan's President Pervez Musharraf has said the chances of war with India over the disputed territory of Kashmir are "minimal".

The threat of war in the last four or five days has diminished

President Musharraf

His comments come amid growing signs that both sides are stepping back from a major conflict over the issue.

However, shelling across border continued on Sunday.

And Pakistan has demanded the release of a political separatist arrested in Indian-administered Kashmir.

The man, Syed Ali Shah Geelani, has been charged with receiving money from Pakistan's intelligence services to fund militant groups.

'Threat diminished'

President Musharraf made his upbeat comments in an interview with Malaysia's New Sunday Times newspaper.

	Rising tension: 1 October 2001: 38 killed in attack on the Kashmir assembly in Srinagar 13 December 2001: 14 killed in attack on the Indian parliament building in Delhi 14 May 2002: More than 30 killed in attack on an Indian army camp in Kashmir 21 May 2002: Moderate Kashmiri politician Abdul Ghani Lone shot dead South Asia's high nuclear stakes

"The threat of war in the last four or five days has diminished," he said.

He also referred to his recent talks with US Deputy Secretary of State Richard Armitage.

"I am very optimistic that if whatever discussions we had are accepted, then things should move in a better direction," he was quoted as saying.

Mr Armitage said on Saturday that India was likely to make some conciliatory gestures towards Pakistan.

India has welcomed Pakistan's pledge to Mr Armitage to stamp out cross-border terrorism.

Possible steps could include the return of some diplomats to Islamabad and moves to ease the military tension.

Reports from Delhi say the Indian Government may announce such measures before US Defence Secretary Donald Rumsfeld arrives in the region later this week.

The current crisis began after India blamed Pakistani-based militants for an attack on parliament in Delhi last December.

It said the Pakistan intelligence services helped organise the attack.

For months, about one million troops have been amassed on both sides of the border, prompting fears of a nuclear war.

The nuclear rivals have fought two of their three wars over Kashmir.

'Not over'

President Musharraf's optimism is reflected a number of Indian newspapers on Sunday.

"Finally peace gets a chance," says The Economic Times.

However, with so many troops massed along the border, it is clear the crisis is not over yet.

The BBC's Jill McGivering in Delhi says another major terrorist attack or military clash could still jeopardise peace hopes.

'Watch from Pakistan'

Pakistan's Foreign Ministry accused India on Sunday of "utter disregard for human rights in Kashmir.

It was reacting to the arrest of the Kashmiri separatist politician Syed Ali Shah Geelani in Srinagar.

Wreckage of an Indian spy plane in Pakistan

Indian police said they found more than one million rupees and $10,000 when they raided Mr Geelani's house, acting on a tip-off.

They also said he had a diamond-studded watch inscribed with the words: "From the Pakistan Government" on it.

He was arrested under recent anti-terrorism legislation that has been heavily criticised as draconian by the opposition and human rights groups.

On Saturday the two sides were involved in a diplomatic row when Pakistan accused India of deliberately violating its airspace with a spy plane.