Prime Minister Manmohan Singh warned Pakistan Thursday against "anti-India activity" as tensions rise between the nuclear-armed rivals over a deadly attack on Indian soldiers.

"India has always strived for friendship with its neighbouring countries," Singh said in an annual address marking India's 1947 independence from Britain delivered from the ramparts of the historic Red Fort in New Delhi.

"However, for relations with Pakistan to improve, it is essential they prevent the use of their territory and territory under their control for any anti-India activity", Singh said.

The Congress prime minister spoke from a bullet-proof enclosure at the Red Fort, which had been turned into a virtual fortress with tens of thousands of security forces guarding against a possible militant strike.

India blamed the killing of five of its soldiers in disputed Kashmir last week on the Pakistan army and the incident has fuelled tensions between the neighbours.

The Indian leader condemned the attack as "dastardly" and said New Delhi would "take all possible steps to prevent" future such incidents, as intermittent firing continued along the heavily militarised ceasefire line dividing Kashmir.

India's army accused Pakistan troops of injuring three Indian soldiers in Thursday's firing between the two armies along the boundary known as the Line of Control, according to the Press Trust of India news agency.

Islamabad has denied involvement of its soldiers in last week's ambush, one of the deadliest in years targeting Indian troops in the Muslim-majority region.

Kasmir has been the trigger of two of the three wars between the nations.

Pakistan's new prime minister Nawaz Sharif pledged Wednesday to respond to the intensifying friction with "restraint and responsibility".

But the renewed tensions have jeopardised plans for what the two governments hoped might be a breakthrough encounter between Singh and Sharif on the sidelines of a UN meeting in New York next month.

India's main opposition Hindu nationalist Bharatiya Janata Party (BJP) has demanded that Singh abandon tentative plans to meet Sharif.

BJP leader and potential prime ministerial candidate Narendra Modi accused Singh on Thursday of failing to "talk tough" toward Pakistan, and added Indian voters were "restless for change" with a stuttering economy and a government mired in corruption scandals.

National elections must be held by May 2014.

Rebel groups have been battling Indian forces since 1989 for the independence of Kashmir or its merger with Pakistan in hostilities that have claimed tens of thousands of lives, mostly civilians.

In Muzaffarabad, the main city of the Pakistani sector of Kashmir, hundreds gathered to mark Independence Day as a "black day". They burnt an effigy of Indian Defence Minister A.K. Antony, who declared this week that India's army had the "freedom to respond appropriately" to attacks.

Abdul Aziz Alvi, the Kashmir head of Jammat-ud-Dawa, a hardline Islamic group blamed by India for militant assaults, threatened new violence.

"We announce today that we too have no bar on us -- we will break the ceasefire from wherever we like and wage jihad (holy war)," Alvi said.

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