Prime Minister Manmohan Singh on Friday said that Indian cannot wish away Pakistan as a neighbour and has to work towards resolving conflicts such as the recently heightened tensions along the border in Jammu and Kashmir.
However, incidents such as the killing and beheading of two Indian soldiers along the Line of Control of had to be dealt with firmly, Singh said.
"We live in a dangerous and volatile neighbourhood. We must understand they are our neighbours. We must respect that and can't wish that away," Singh said at a two-day conference of the ruling Congress party in Jaipur.
"While we must deal with incidents that have taken place recently firmly, there are others in the region who want a democratic and economically developed region, and we must keep that in mind," he added.
Earlier, speaking at the Congress "Chintan Shivir", party president Sonia Gandhi put up a firm stance saying that dialogue with Pakistan must be based on accepted principles of civilised behaviour.
Congress leader and Indian External Affairs Minister Salman Khurshid had said that India would not let the LoC flare-up upset the peace process with Pakistan.
Earlier this week, Prime Minister Singh had said that "business as usual" cannot continue with Pakistan unless there was some action on the killing and mutilation of two Indian soldiers.
Ties between the two nuclear armed neighbours deteriorated last week over border firing and killing of two Indian soldiers, including the beheading of one of the martyrs by Pakistani troops.
Pakistan has, however, denied its soldiers killed or beheaded any Indian soldiers.