Speaking at a news conference after talks in Islamabad with President Musharraf, Mr Powell said that the issue was now firmly on the international agenda, but could only be resolved through talks.

We're monitoring this [militant infiltration] carefully. We still are not able to say that they have been stopped, although they have gone down

US Secretary of State Colin Powell

Mr Powell, who arrived in Islamabad from Delhi, made clear that the US was unable to say that Pakistan had ended all infiltration by militants into Indian-administered Kashmir, although he said it had reduced.

He also repeated a call for free and fair elections in Indian-administered Kashmir and for the process to be monitored by independent observers.

It is the secretary of state's third visit to the South Asian rivals since October and comes amid renewed violence in Kashmir.

Tensions remain

Mr Powell insisted that the US would be monitoring the question of infiltration by Pakistan-backed militants into Indian-held territory very carefully.

"The United States views Pakistan's assurances that it would permanently cease infiltration activity... as an important commitment," he said.

But he acknowledged that the Indians had a "different view" on the issue.

After talks in Delhi, Mr Powell said the level of tension between the two countries had "improved considerably" over the past month, but noted that "the tension is still there".

He told Indian leaders that free and fair elections in Indian-administered Kashmir in mid-October would be a step towards resolving the dispute, while "allowing independent observers and freeing political prisoners would be helpful".

India has detained several Kashmiri politicians and a journalist in the past few months.

While India has made some conciliatory gestures towards Pakistan, such as moving its warships away from Pakistani waters, the secretary of state said India should take "further de-escalatory action".

Dialogue rejected

After a meeting with Mr Powell, the Indian Foreign Minister, Yashwant Sinha, said the "necessary conditions" did not exist for direct talks with Pakistan, which India has accused of sponsoring cross border raids by Islamic militants.

Powell's regional tour

India Pakistan Thailand Malaysia Singapore Brunei Indonesia Philippines

Mr Sinha also rejected calls for international monitors in Kashmir, saying the elections would be "very free and fair".

India and Pakistan have amassed about one million troops on their shared border since tensions soared late last year, threatening to erupt into full-scale war over Kashmir.

Tensions had abated since early June, after intensive international efforts to prevent a full-scale war erupting over Kashmir.

But the situation worsened again earlier this month after Islamic militants killed 28 Hindus in a slum in Indian-controlled Kashmir near the border with Pakistan.

There was more violence on Saturday, when Indian and Pakistani troops exchanged small-arms and mortar fire across the Kashmiri border, while at least seven people were killed in attacks in Indian Kashmir.