Indian Prime Minister Manmohan Singh has used his Independence Day speech to call on Pakistan to end all support for militants in Kashmir.
Singh says there has been some progress in talks with Pakistan
His remarks coincided with a grenade attack at an Independence Day parade venue in Indian-administered Kashmir's capital, Srinagar. No one was hurt.
Pakistan responded to Mr Singh's comments by again denying it was aiding militants in Kashmir.
And Mr Singh in his speech also talked of progress in the peace process.
"There seems to be some success in our search for peace and harmony now," he said in his speech, delivered from behind a bullet-proof glass screen at the 17th-Century Red Fort in Delhi.
"I have said earlier and I repeat again that there is no issue which cannot be resolved through talks."
But the prime minister also warned of tough action from his government if violence continued in Indian-administered Kashmir.
"If violence continues, then our security forces will reply with an iron hand," he said.
Responding to the comments, a Pakistani foreign ministry spokesman said Islamabad was neither supporting any armed militancy, nor was there any terrorist infrastructure within Pakistan.
Naeem Khan said both countries had worked recently towards the settlement of all outstanding disputes.
Mr Singh in his speech also said India should focus on economic growth and ensuring social justice.
There was a heavy police presence for the PM's speech
"Our vision is not just of economic growth, but also of a growth which would improve the life of the common man," said the prime minister.
The Srinagar attack targeted the stadium where the national day was to be celebrated.
It took place an hour before Jammu and Kashmir Chief Minister Mufti Mohammad Syed was due to arrive, under conditions of tight security.
Shops and businesses across Srinagar are shut after separatists groups called for a boycott of the celebrations.
On Friday evening, police said Islamist militants had killed five Hindus and injured nine in an attack on a remote mountain village.
Kashmir has seen a recent spate of violence despite peace talks.
India and Pakistan both claim the divided region in its entirety.