Singh's government is under pressure for rising inflation
Indian PM Manmohan Singh has said that terrorism and extremism had emerged as the main challenge to India's unity.
He was speaking at Independence Day celebrations in the capital, Delhi.
Hundreds of thousands of security personnel have been deployed across India following a series of bomb blasts in the past few months.
There have also been violent protests more recently in Indian-administered Kashmir where Muslim separatists called for a boycott of the celebrations.
In his traditional Independence Day address made from Delhi's historic Red Fort, Mr Singh said: "Terrorism, extremism, communalism and fundamentalism have emerged as major challenges to the unity and integrity of our country."
He said India needed to strengthen its intelligence services and police forces to deal with terrorism.
But Mr Singh's biggest concern is the growing violence in Indian-administered Kashmir, with more than 20 people killed in the past week.
The region has witnessed the biggest protests since a separatist rebellion broke out nearly two decades ago.
"In this hour of crisis, divisive politics will lead us nowhere. I appeal to all political parties to keep the long-term interests of Jammu and Kashmir in view and come together to find a permanent solution to the problems of the state," he said.
Security is intense in Kashmir as well as the rest of India, with hundreds of thousands of forces deployed to prevent any possible violence.
Kashmir has been rocked by violence recently
Mr Singh said that the recent attack on India's embassy in Kabul had cast a shadow on India's ties with Pakistan.
This is the prime minister's last Independence Day speech ahead of the next general elections, due in eight months.
He outlined a number of measures aimed at improving the country's economy.
His government is under pressure with annual inflation at a 13-year high.
"The inflation we have seen this year is basically due to external factors," Mr Singh said.
"All over the world and in global markets the price of food, fuel and other commodities has been rising. In many developing countries the rate of inflation is double that in India."