Prime minister Manmohan Singh today rejected as "false accusations" Pakistan's charges that India was fomenting trouble in Balochistan and said the country is not in the business of exporting terror.

"This is entirely wrong. We are not in the business of spreading terror in Pakistan or in any other country. We are not in that business. And the Government of Pakistan and the people will jolly well know that their accusations are false accusations," Singh told a press conference here.

He was replying to a specific question on Pakistan interior Minister Rehman Malik's allegations that India was arming militants in Balochistan.

Singh also refused to bracket Naxals with terrorists and ruled out use of armed forces against them.

He said the government is willing to hold talks with the Maoists if they abjured violence.

"They (Naxals) are banned organisations and are covered under Unlawful Activities (Prevention) Act," he said replying to a question if the government proposed to declare the ultra-left groups as terror outfits.

"We are not in favour of using the armed forces against the Naxalites. We have adequate number of other forces like para-military forces and police (for counter-Naxal operations)," he said, while underscoring the need for looking at the causes of alienation of the people, particularly the tribals.Terming Naxalism as the greatest internal security threat, the Prime Minister said dialogue with them was possible only if they shunned violence.

"Why the Naxalites alone, the government is prepared to have a dialogue with even the terrorists in Jammu and Kashmir if they abjure violence," he said.

"Growth of Naxalism, particularly in central India, also obliges us to look at what it is that causes the sense of alienation," Singh said.

To a volley of questions on the Mumbai terror attacks, the prime minister said there has been some progress in the case from Pakistan's side and that he has still not lost hope.

"There has been effect (due to) the pressure exerted by us and the international community. For the first time, Pakistan agreed that the conspiracy leading to the tragedy in Mumbai was hatched in Pakistan and that the citizens of Pakistan were involved," he said.

The prime minister said never before had Pakistan agreed to such a "proposition". "They have always maintained that they have nothing to do, their people are not involved. So there is some progress," he said.

Pakistan should investigate all those who were involved, including Lashkar-e-Toiba, its founder Hafiz Saeed, as also another terror group Jaish-e-Mohammad, he said.

"There should be a fair trial which will result in proper punishment. We have not lost hope," he said.

On the situation in the neighbourhood, the prime minister said, "We have to make adequate preparations to deal with the
consequences of this overflow of terrorism from the neighbourhood to our country."

"We are taking all necessary steps in  that direction but it is still my belief that particularly Pakistan and the people and Government of Pakistan should realise the great harm and (their) patronisation of terror groups have done to the South Asian region," the prime minister said.

Singh said if the countries work together, only "positive good" can come out of it.

"We need a neighbourhood of peace, friendliness and I will be the last one to say that, I think, if these conditions prevail (like) today in our neighbourhood in Pakistan and in Afghanistan the situation is not what it should be," he said.

He was replying to a query about the recent blast outside the Indian Embassy in Kabul and the terror attack at the Pakistan army headquarters in Rawalpindi.

The prime minister said the rising role of terrorist groups is a matter of concern.

Singh refused to be drawn into any controversy over CBI's decision seeking closure of the case against Italian businessman Ottavio Quattrocchi in the Bofors gun deal.

"It is not proper for me to comment on CBI petition for closure of the case as it is sub-judice, but we acted on legal advice from attorney general, solicitor General (which was) endorsed by the law minister," he said.

Maintaining that the worst of price rise was over, the prime minister ruled out announcement of any fresh farm loan waiver and hoped that the rabi crop would be normal.

He also described as "improper" the Maharashtra-for-Marathi campaign by MNS leader Raj Thackeray, saying, "I feel sorry. I am confident the people of Maharashtra will give him a befitting reply."