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Prime Minister Narendra Modi will not attend the South Asian Association for Regional Cooperation (Saarc) Summit in Islamabad in November, a foreign ministry statement said on Tuesday, amid mounting tensions between India and Pakistan over terrorism.

The announcement by the foreign ministry came as India signalled a rethink on a 1960 water-sharing pact with Pakistan that is a lifeline for the economy as well as revoking the most favoured nation status extended to Pakistan under international trade rules.

Tensions between the two countries had been rising since July over their dispute over the Himalayan region of Kashmir.

They were exacerbated by the 18 September terrorist strike on an Indian army garrison in Uri in north Kashmir.

“India has conveyed to current Saarc Chair Nepal that increasing cross-border terrorist attacks in the region and growing interference in the internal affairs of member-states by one country have created an environment that is not conducive to the successful holding of the 19th Saarc Summit in Islamabad in November 2016," the Indian foreign ministry statement said.

“India remains steadfast in its commitment to regional cooperation, connectivity and contacts but believes that these can only go forward in an atmosphere free of terror," it said.

“In the prevailing circumstances, the government of India is unable to participate in the proposed Summit in Islamabad," the statement said.

“We also understand that some other Saarc member-states have also conveyed their reservation about attending the Islamabad Summit in November 2016," the statement added, referring to the reservations expressed by Afghanistan and Bangladesh, both of whom share uneasy ties with Pakistan.

There was no immediate response to the Indian statement from the Pakistan high commission in New Delhi.

India pulling out means that the Saarc summit will have to be postponed as the Saarc charter stipulates that the heads of state or government from all Saarc countries have to confirm attendance for the summit to take place. Islamabad was to host the summit on 9-10 November.

India-Pakistan ties have been in free fall since July when Islamabad described Burhan Wani, a terrorist belonging to the Hizbul Mujahideen group who was shot dead by Indian security forces as a “martyr" and a “Kashmiri leader".

Pakistan has been vociferously highlighting what it calls human rights violations in Kashmir, riling India. Some 86 people have been killed and many injured in the unrest that followed Wani’s killing.

Pakistan prime minister Nawaz Sharif demanded an international probe into the deaths in Kashmir in his address to the UN General Assembly on 21 September, which did not help matters.

Tensions over the unrest in Kashmir were heightened by the terrorist attack in Uri on 18 September killing 18 Indian Army soldiers.

India had then indicated that it would not be business as usual with Pakistan, with Modi calling a meeting of senior ministers at his residence last week to chalk out India’s strategy following the attack.

On Monday, Modi directed his government to step up the exploitation of India’s share of water in the Indus Water Treaty, and called off India’s participation in meetings of Indus water commissioners stating that “blood and water cannot flow together".

India is also to review the MFN status extended to Pakistan in 1996 unilaterally in response to the Uri attack on Thursday.

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