The military leader's comments late Thursday came days after New Delhi ruled out redrawing the borders of the Himalayan territory, which is carved up between the South Asian neighbours but claimed in full by both.

"We will be flexible when the other side also shows flexibility," Musharraf told a dinner audience including local politicians and the US ambassador, the state-run Associated Press of Pakistan reported.

India and Pakistan have fought two of their three wars over Kashmir since independence from Britain in 1947 and it has nearly sparked another two conflicts in recent years.

"Both sides need to move back from their maximalist positions on Kashmir, the cause of tension and main dispute between the two countries. We need to meet somewhere midway," the general said.

In October Musharraf set out suggestions for resolving the dispute, including demilitarising Kashmir and either placing it under United Nations mandate, putting it under joint control or giving it independence.

However Indian Prime Minister Manmohan Singh on Tuesday said that peace talks with Pakistan would not include any redrawing of boundaries or another partition of the territory.

Musharraf said Thursday he was "hopeful that good sense will prevail".

He had told AFP in November that he was losing sight of the "light at the end of the tunnel" because of India's attitude towards the dispute.

India accuses Pakistan of pushing militants across the border to join a 15-year-old revolt in Indian Kashmir that has left over 40,000 dead. Pakistan denies the charge.