Colin Powell was welcomed by Jaswant Singh
Mr Powell met senior Indian leaders, including Prime Minister Atal Behari Vajpayee, during a lightning regional tour that has also taken him to Pakistan.
India has dismissed the reports as a "complete fabrication".
Natural allies
Colin Powell said the United States and India were natural allies who were standing "shoulder to shoulder" in the fight against terrorism.
"The United States and India have been united against terrorism and that includes terrorism directed against India as well," Mr Powell said at a joint news conference with Indian Foreign Minister Jaswant Singh.
Correspondents say India has been unhappy that the campaign against terrorism has not taken on board its position on Kashmir.
Mr Powell's remarks in Islamabad, that Kashmir was the central issue between India and Pakistan, were strongly criticised in India.
"We certainly do not agree with this premise," Indian Foreign Ministry spokesperson Nirupama Rao said.
"There should be no confusion between cause and effect. The present situation in Jammu and Kashmir is a consequence of state-sponsored terrorism and not its cause."
Claims and denials
Pakistan put its forces on high alert on Wednesday, accusing India of moving some troops and air force assets "which may prove to be a threat".
Military spokesman Major General Rashid Qureshi said Pakistani forces were ready to "thwart any attempt at mischief or misadventure".
He did not give any other details.
An Indian Foreign Ministry spokesman said the troop movements were "routine".
On Tuesday India said it would be "ruthless" in dealing with militant infiltrators who it says are supported by Pakistan.
On Monday, the Indian army used heavy artillery and mortar fire as it shelled Pakistani positions across the line of control that divides the disputed region.
BBC correspondent Jon Leyne, who is travelling with the secretary of state, says the attack was clearly timed to coincide with Mr Powell's visit.
But the Indian foreign minister also said his country was committed to improve its relations with Pakistan, despite differences and setbacks.
"The two peoples have to forget the past and forget the mistakes of the past 50 years," Jaswant Singh said at the news conference.
Our correspondent says in two days of talks, Colin Powell seems to have reassured two of the United States' key allies and done important work building agreement on the future shape of the Afghan government.
India, which is one of the supporters of the anti-Taleban Northern Alliance, pushed its case to be involved in discussions surrounding the future of Afghanistan.
Mr Powell also announced that the Indian prime minister would visit Washington for a "working visit" on 9 November.
On Tuesday Colin Powell held talks with Pakistani President Pervez Musharraf, who pledged to support the US campaign in Afghanistan but said he hoped for a "short and targeted" military campaign.
He said he and Mr Powell had agreed that any future Afghan administration must be broad-based and would include members of the opposition and some members of the Taleban.
After his visit to South Asia, Mr Powell left for China.