"We are having a very nice relationship with India, the best of the relationship we have ever had. The confidence-building measures are working very well and I think the defence of Pakistan today is much safer than five years (ago)," Mukhtar, senior leader of the Pakistan People's Party that heads the ruling coalition and one of Pakistan's leading industrialists, said.

Ruling out the possibility of a war on the Kashmir issue, the Pakistani minister said the two countries had shown flexibility in their traditional stand on the issue.

"I am sure that both the countries are showing flexibility from their traditional positions. We don't want to fight a war," Mukhtar told Dawn News channel in an interview.

He said the issue will be resolved only through the opening up of the borders and greater inter-mingling of Kashmiris from both sides.

"Today is the time for economic wars and we must prepare ourselves. There are other problems in Pakistan and India there are food shortages, the oil problem, the electricity problem and these problems can't be solved if we are at war with each other."

Pakistan, he said, was "trying to help India" in the economic field. "We are saying that we would like to buy gas from Iran and that pipeline will go to India, which is a big market. They will benefit and we will also benefit," he said. "We are looking at these kind of measures. We are giving them assurances that once you get the gas through the (pipeline), nobody would ever stop it. And if we are assuring them that it will never happen, nobody will stop it, that means that we have no intentions of going to war," the minister said.

Mukhtar, who was tipped for the post of prime minister before Yousuf Raza Gilani was chosen for the slot, also said India and Pakistan need "to have confidence in each other".

"And that confidence people will only develop once they start opening up and doing business with each other. This will take time, it will not be done overnight. The situation is not what it was five years ago or 10 years ago, it is much better," he pointed out.

"More and more people are crossing through the Wagah border, parliamentarians can go without any visas and business is being done. We recently imported 1.5 million bales (of cotton) worth a billion dollars from India and these are the measures which are going to bring the two countries together.

One day finally, we may not be in a state of war."

Replying to a question on resolving the Kashmir issue, he said: "This issue will be resolved only once you have a lot of people communicating with each other."

Mukhtar said more border points and travel routes like the Jammu-Sialkot road should be opened up. The Kashmir issue would be settled once Kashmiris from both sides start meeting each other, "inter-mingling and having marriages", he said.

"Once they open up the borders for them, I am sure that this issue will come to a very, very low point and would never be a flashpoint," Mukhtar said.

Asked if Pakistan needed to keep defence expenditure at a high level if its ties with India were improving, Mukhtar said the country would "have to bring our armed forces to that capability level where nobody could, either on the conventional or nuclear side, bother us".

The military is "strong enough to defend the borders" and "we hope that the nuclear side is never used", he said. "I wish and pray that we don't have to fight even a conventional war but spending of money...is very important," Mukhtar added.

"Our neighbours know they can't just bulldoze us and we know that we can't bulldoze them. This realisation is (leading) to a very nice relationship with each other."

Mukhtar also said Pakistan was not facing any major security challenges "except for the problems we are having on the border with Afghanistan, where the other party is complaining that people are crossing over".

"The CBMs with Afghanistan are not all that strong."

The Defence Minister also dismissed concerns about the safety of Pakistan's nuclear arsenal, which he said is in "the safest of hands".