Ahead of Saturday's meeting with External Affairs Minister Pranab Mukherjee, Pakistan President Pervez Musahrraf said on Friday that he saw 'light at the end of the tunnel' in resolving disputes with India.

He, however, linked improvement of ties between the two countries to the resolution of the Kashmir issue.

Addressing a group of students from Harvard Business School at the Aiwan-e-Sadr, the President said, 'I see light at the end of tunnel', but stressed upon the need for moving ahead on conflict resolution along with the confidence building measures between the two South Asian neighbours.

'We will achieve results maybe sooner than we expect. If resolve and flexibility are shown by the leadership, we will be able to resolve the disputes, including the Kashmir issue', state-run APP news agency quoted him as saying.

Mukherjee who will be arriving for a two-day visit to Pakistan on Saturday is scheduled to meet Musharraf after his arrival to deliver an invitation to attend the SAARC summit to be held in April and to hold talks on the Indo-Pak peace process.

The Pakistan President said that Islamabad was trying to bring peace in South Asia by resolving all outstanding issues and moving ahead with confidence building measures.

He stressed upon the need for reciprocity on conflict resolution as well.

Stressing on 'harmonious relationships' between the two countries, he said, "We must bring peace to our region for the sake of the people of two countries."

Musharraf also spoke of having a good equation with Prime Minister Manmohan Singh and said that it was imperative for the present leadership of the two countries to strive for achieving peace by resolving disputes, as there was no guarantee that good personal rapport will always remain between the future leadership.

In response to a question, Musharraf said tremendous potential existed between Pakistan and India for furthering economic, trade and tourism ties but added that this potential could only be realised through lasting peace among the two countries.

"We have to resolve the disputes. We cannot live in a make believe world. We must have economic and trade contacts and harmonious relationship not only for India and Pakistan but also for entire South Asia. We are moving well in that direction and I really hope and pray to God we deliver permanent peace between India and Pakistan," he said.

Durable peace can only be achieved in South Asia if outstanding disputes between Pakistan and India, particularly the ashmir issue, were resolved through a negotiated settlement and in accordance with the wishes of the Kashmiri people, he said.

On Pak-US relations President Musharraf said Islamabad was looking at a free trade agreement with Washington for increased trade and economic relations and to expand Pakistan's industrial base.

The President said Pakistan believed in the importance of having 'trade rather than aid' and desired greater market access to boost exports and help its industry grow on a fast track basis.

"Enhancing trade and commerce will help create more jobs, bring own poverty and strike at the core of extremism and terrorism," Musharraf said.

The President said the United States was already supporting Pakistan in enhancing its response capability in the fight against terrorism.

President Musharraf said Pakistan has played a pivotal role in the war against terrorism and has done more than any other country against this scourge.

"We have done our best, arrested over 700 including the big wigs of Al-Qaeda. We fought the terrorists in our cities and cleaned them out," he said.

"Now the terrorists cease to exist as a cohesive force in Pakistan," the President added.

Musharraf said Pakistan was adopting a four-pronged holistic strategy to separately deal with extremism and terrorism.

He said extremism is a state of mind and has to be curbed through a combination of political, administrative and development measures.

He, however, said terrorism, on the other hand, needs to be militarily crushed.

The President also spoke about steps being taken for the protection of the rights of the minorities and women in the country, as well as sustainable democracy at the grass roots level.

He said that the country has achieved economic stability and its gains were now being transmitted to the common man.