Pakistan President Pervez Musharraf has said his country is ready to set aside its demand for settlement of the Kashmir issue through United Nations resolutions.
He favoured both sides adopting a 'flexible approach' and meeting 'halfway' for a solution.
But the Pakistani president also accused India of being an 'intransigent and arrogant' power, which attempted to 'coerce' Pakistan.
Musharraf also expressed his desire to meet Prime Minister Atal Bihari Vajpayee on the sidelines of SAARC summit to be held here from January 4 to 6.
"It would be a pity if Vajpayee came all the way to Islamabad and went back without meeting me," he said in an interview to new agency Reuters.
He added that such a move would be a loss to moderates and gain for extremists on both sides.
Warning that there was a danger of extremists on both sides gaining ground if the two countries delayed political talks to resolve Kashmir issue, Musharraf said that Pakistan has left aside its stand for implementation of UN resolutions on Kashmir.
"We are for the United Nations Security Council resolution, whatever that stands for. However, now we have left that aside," he said.
"We keep saying that if we want to resolve this issue both sides need to talk with each other with flexibility... coming beyond stated positions... coming and meeting half way somewhere," he said.
Musharraf said, "They (India) are intransigent. They suffer from arrogance of power... I will never submit... We believe in sovereign equality. We want to live in honour and dignity."
"If political dialogue does not come about, who wins and who loses? It is the moderate who loses and extremist who gains. It is a pity if he (Vajpayee) comes here and he does not want to talk. That will be further loss of time and opportunities," he said.
As per the detailed programme finalised by Pakistan in consultation with India, Vajpayee would attend a banquet being hosted for heads of SAARC states and governments by Musharraf on January 4.
However, the two have few chances of meeting, as the summit would be hosted by Pakistan Prime Minister Mir Zafarullah Khan Jamali.
Musharraf said the ongoing ceasefire along the LoC and the confidence building measures announced by India raised the expectations of the people on both sides to resolve outstanding issues.
"We have come to a stage where there is a thaw in relations. Where there is expectation on both sides. The people of India and Pakistan want peace and they want a resolution including Kashmir.
"If the leadership does not rise to the occasion it will be a pity. I think we will disappoint the public again," he said in obvious reference to the failure of Agra summit.
"Pakistan is prepared to rise to the occasion and prepared to be flexible. But India has to be flexible also," he said.