Accusing Pakistan of taking 'no significant action' to dismantle terrorist infrastructure, Prime Minister Atal Bihari Vajpayee on Saturday said reports suggest that the ISI is now using terrorists based in Nepal and Bangladesh to pursue its anti-India agenda.

Asserting that assurances given by the leadership in Islamabad on the issue of cross-border terrorism remained unfulfilled, he said, "The Pakistani establishment does not appear to be interested in establishing tension-free and good neighbourly relations with India by ending its proxy war against our country."

"For us, the most disconcerting aspect of terrorism is that it is sponsored, supported and funded by Pakistan as a matter of state policy," he said inaugurating the day-long Chief Ministers' Conference on Internal Security in Delhi.

"It has not taken any significant action against terrorist camps and infrastructural support to terrorism. This questions its claim to participate in the international struggle against terrorism," Vajpayee said.

The prime minister said Pakistan was also violating UN Resolution 1373, which calls upon all countries not to support terrorism in any way and for whatever cause.

"We have to intensify our efforts to counter terrorism in Jammu and Kashmir and subversive activities in those states bordering these two countries (Nepal and Bangladesh) and elsewhere," he said.

Observing that much to the discomfiture of anti-India forces, the situation in J&K 'is improving', the prime minister said the immediate task before the state government is to strive to fulfil the legitimate aspirations of the people through a two-fold response.

"One, to strengthen the atmosphere of peace by dealing firmly with those intent on disturbing it, and secondly, to vigorously implement all developmental, welfare and employment-generating programmes," he said.

The assembly elections in J&K last October saw a big voter turnout 'despite the atmosphere of fear and violence sought to be created by Pakistan-backed groups', he said adding that the free and fair poll was a 'victory for Indian democracy' with the people in the state giving a verdict for peace and rapid socio-economic development.