Addressing a seminar on South Asian security, Chidambaram urged Islamabad to do more to curb Islamist militancy and warned that India would respond "swiftly and decisively" in the event of any attack deemed to be from Pakistan.
ndia says Pakistan must 'reinvent' itself
Arguing that Pakistan had proved a "difficult neighbour" ever since partition and independence in 1947, Chidambaram said India's main hope was for a political transformation in Islamabad.
"It must reinvent itself ... to become a truly democratic country where real power lies in democratically elected leaders' hands," he said.
"The two countries are nuclear powers, so war is not an option," he said. "We must talk when we can, at other times we have to simply be vigilant and alert."
Top civil servants from the Indian and Pakistani foreign ministries met in New Delhi last month, for the first official talks since India suspended dialogue in the wake of the 2008 Mumbai attacks.
The meeting made no progress on core disputes and ended with little more than a vague promise that both sides would stay in touch.
Pakistan, which had wanted a resumption of full-fledged peace talks, complained that the Indian side was only interested in discussing the issue of terrorism.
India blamed Pakistan-based militants for the carnage in which 10 Islamist gunmen targeted the country's financial capital, killing 166 people.
Asked what would happen in the event of a similar attack in the future originating from Pakistani soil, the minister said India would "respond swiftly and decisively".
Asked whether that would involve a military response, he declined to elaborate.
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