Islamabad, Pakistan ? In South Asia to reduce tensions between the nuclear neighbors, U.S. Secretary of State Colin Powell said Sunday that Pakistan and India appeared to be inching toward talks that could lead to a lasting peace to the region.

India says it would not consider dialogue with Pakistan until it is convinced that Pakistan-based militants have halted incursions into the Indian-controlled portion of the disputed Kashmir region.

“I am hopeful that if we keep moving in the direction we’ve been moving in the past couple of months, where the tension has been going down and where there have been some preliminary de-escalatory steps … I think the possibility of dialogue in the near future is something that can be achieved,” Powell told a news conference after meeting President Gen. Pervez Musharraf.

India contends that infiltrations are continuing – although it acknowledges their level has been reduced – but Musharraf told reporters separately that they had been entirely halted.

“It is not taking place now. Whatever the Indian side is saying is absolutely baseless,” he said. “I don’t have to do anything because we’ve already done it.”

Powell characterized Musharraf’s denial as “assurances,” a phrasing underlining the delicacy of the situation. During an earlier stop in India he said, “I think there has been a reduction in infiltration levels (but) infiltration is continuing.”

Powell’s four-hour stop in the Pakistani capital of Islamabad was part of his third visit to the region since October.

In his talks with Musharraf, Powell had to juggle Washington’s need for Pakistan’s support to capture fleeing al-Qaida and Taliban warriors with demands that cross-border attacks into Indian Kashmir come to an end.

While in New Delhi, Powell met Indian leaders who insisted that infiltration has only marginally decreased since the United States relayed a promise from Pakistan’s leader to end the border crossings.

India accuses Pakistan of arming, funding, training and helping militants to cross the frontier to make attacks in Indian territory in a 12-year insurgency that has killed more than 60,000 people.

Pakistan has said it supports the guerrillas’ cause, but denies it provides material aid.

In Pakistan, Powell said “everyone agrees the infiltration has gone down (but) the United States is still not able to say it has been stopped but they have gone down.”

Powell’s news conference in Pakistan was jointly held with the Minister of State for Foreign Affairs Inam-ul Haq before meeting with Musharraf.

Tensions between India and Pakistan flared last year after an attack on the Indian parliament that New Delhi blamed on Pakistan, resulting in a massive deployment of troops by both Pakistan and India. Escalating tensions also generated world fears that a war in South Asia could result in the use of nuclear weapons, which both countries say they possess.

Both India and Pakistan conducted underground nuclear tests in 1998 and both say they have inducted nuclear weapons into their arsenals, but neither has specified the type or numbers of nuclear weapons.

In Pakistan Musharraf is under pressure from Islamic militants, who accuse him of betraying Kashmiri insurgents who have been fighting since 1989 to press their demand that a united Kashmir be either independent or joined with Islamic Pakistan.

They have threatened to topple Musharraf.

On Saturday a fourth person was arrested in Pakistan in connection with a plot to assassinate Musharraf in southern Karachi last April using an explosive-laden truck. That same vehicle was later used in an attack against the U.S. Consulate in Karachi that killed 14 people, all of them Pakistanis.

Pakistani authorities say al Qaida was involved in the attacks.

Powell urged India to take steps that would convince Kashmiris that an election in its Jammu-Kashmir state this fall will be free and fair.

“We look forward to concrete steps by India to foster Kashmiri confidence in the election process. Permitting election observers and freeing political prisoners would be helpful,” he said.