President Pervez Musharraf [Images] has asserted that there are indications of 'forward movement on the Kashmir dispute' and India and Pakistan have reached a stage where the issue could be 'resolved politically'.

Speaking at a ceremony to inaugurate the Neelum-Jhelum hydroelectric project in Pakistan-occupied Kashmir on Saturday, Musharraf said: "Some progress has been made towards finding a political resolution to the issue though there had been a slowdown in the past few months."

There were indications of 'forward movement on the Kashmir dispute' and progress on the dispute has come to a stage where it can be resolved politically, Musharraf was quoted as saying by state-run APP news agency.

The Pakistani President also reiterated his resolve not to let down the Kashmiri people.

"I can never let down the Kashmiris, (I) can never forget Kashmir. A solution for Kashmir is closest to my heart and I will take it forward towards a resolution," he said.

"Again there are indications (and) we will make progress towards dispute resolution with India," Musharraf said, adding that Pakistan wanted to resolve all disputes with India, including the Kashmir issue, politically.

He said he was proud to have made some contribution towards resolving the Kashmir issue but pointed out that 'unless there is clarity in (our) hearts, we cannot move on effectively� we have to go in for dispute resolution'.

Musharraf said the resolution of the Kashmir dispute was important for both Pakistan and India. Unless the issue is settled, their economic and trade ties 'can never normalise', he warned.

Musharraf also noted that there is growing interaction among Kashmiris living on both sides of the Line of Control, and this would help in taking the peace process forward.

The Rs 130-billion Neelum-Jhelum hydroelectric project, which is designed to generate 969 MW power, could give Pakistan 'priority rights' over India to the use of the waters of the Neelum river. The project will be completed in eight years.