Pakistan's president says he will pull back troops from Pakistan-administered Kashmir, if India does likewise in its part of the disputed territory.
President Musharraf says Pakistan must discard the past for peace
General Pervez Musharraf also said he could award Pakistan's highest civilian honour to India's prime minister if he helped solve the Kashmir dispute.
He told the BBC that moves to ease tensions with India - like restoring bus links - were "only the beginning".
Pakistan and India have fought two wars for total control over divided Kashmir.
General Musharraf was responding to questions from BBC listeners and web users.
He described as "extremely annoying" the charge that Pakistan had failed to act against religious extremists.
He was particularly scathing about the charge by Afghanistan's President, Hamid Karzai, that his hardline predecessor as Afghan leader, the Taleban cleric Mullah Omar, was hiding in Pakistan.
He said it was easy for Mr Karzai to sit in Kabul making these accusations, but if the Pakistani authorities had been told this at the time, they would have arrested Mullah Omar.
"We have rounded up over 600 suspects," said General Musharraf. "No country has done more than Pakistan to curb extremism."
General Musharraf's comments follow a week of swift diplomacy in South Asia, which began with Pakistan's offer to stop daily artillery attacks along the de facto border in Kashmir, the Line of Control (LoC).
President Musharraf answers questions from BBC listeners and web-users
Air links - severed since 2001 - were restored between India and Pakistan on Monday, and the two countries are also expected to discuss improving trade and transport ties.
But although India welcomed the ceasefire by silencing its own guns along the LoC, it has warned Pakistan it must stop militants from crossing into its part of Kashmir if the truce is to hold.
India routinely accuses Pakistan of aiding and equipping the militants fighting a 14-year-long insurgency against its rule in Kashmir - a charge Pakistan denies.
General Musharraf said it was a time for "confidence-building" moves with India, but cautioned against complacency.
The president said Pakistan would immediately withdraw the 50,000 troops it maintains in its part of Kashmir, if India
were to do the same across the LoC by withdrawing its 700,000 soldiers stationed there.
Correspondents say India is unlikely to accept Pakistan's offer because its stated position is that Kashmir is a part of India and therefore India has a legitimate right to place its troops there.
India also says it needs a large military presence in Kashmir to deal with attacks by separatist militants, many of whom it says cross over from Pakistani territory.
New ceasefire, old complaint
The president said he was optimistic about the Saarc summit, a gathering of South Asian leaders due to take place in Pakistan's capital, Islamabad, in January.
Peace initiatives, such as the Delhi-Lahore bus, are being pursued
"I am very hopeful," he said. "Prime Minister [Atal Behari] Vajpayee will come here, he will meet people, he will address the main issues."
Asked whether he would meet him, General Musharraf said he would be happy to do so - but that depended on Mr Vajpayee.
He also summarised his four-point plan for peace:
- Establish dialogue between India and Pakistan
- Make the Kashmir dispute a focus of talks
- Eliminate all solutions that are unacceptable to Pakistanis, Indians or Kashmiris
- Find the win-win solution for Kashmir
General Musharraf dismissed the charge by India's Deputy Prime Minister, LK Advani, that the ceasefire would not halt militant infiltrations in Kashmir.
He noted that India has often accused Pakistan's gunners of providing covering fire for infiltrating militants.
Now that a ceasefire is in place, he said, India could not continue with the same complaint.
"Even if two sparrows cross the Line of Control, India will accuse Pakistan of providing them covering fire."
General Musharraf also faced questions about his plans for democracy in Pakistan, and his handling of the economy.
He defended his leadership, saying he had rescued Pakistan from becoming a rogue state.
To a caller who complained that the price of tomatoes had soared, the president advised - "Look here, eat vegetables that are in season."
He said he was doing everything in his power to improve the standard of living for his people.