India warns of 'crushing response' to Kashmir suicide attack

India's prime minister warned Friday of a "crushing response" to the suicide bombing of a paramilitary convoy in Indian-controlled Kashmir, an attack that killed 41 and is now the deadliest in the divided region's volatile history.

Prime Minister Narendra Modi placed the blame for Thursday's bombing squarely on neighbouring Pakistan, which India accuses of supporting rebels in Kashmir.

"Our neighbouring country thinks such terror attacks can weaken us, but their plans will not materialize," he said, adding that government forces have been "given total freedom" to deal with the militants.

The attack is ratcheting up tensions between the nuclear-armed neighbours, who both administer parts of the disputed territory but each claim it entirely. Pakistan has denied any involvement and warned India against linking it to the attack, but that hasn't stopped India from taking action.

India's Finance Minister Arun Jaitley announced Friday that New Delhi was withdrawing the most favoured nation trade status given to Pakistan and would take all possible diplomatic steps "to ensure the complete isolation from international community of Pakistan of which incontrovertible evidence is available of having a direct hand in this gruesome terrorist incident."

Pakistan's Foreign Ministry said the country condemns acts of violence anywhere in the world, and denied any involvement.

"We strongly reject any insinuation by elements in the Indian media and government that seek to link the attack to Pakistan without investigations," it said in a statement.

Rebels, many of whom want Kashmir united with Pakistan, have been fighting Indian control since 1989. But the Muslim-majority region has experienced renewed attacks and repeated public protests in recent years as a new generation of Kashmiri rebels, especially in the southern parts of the region, has challenged New Delhi's rule with a mixture of violence and social media.

In Thursday's attack, a local Kashmiri militant rammed an explosive-laden van into a bus travelling in the paramilitary convoy. In addition to the dead, the attack wounded nearly two dozen other soldiers, India's paramilitary Central Reserve Police Force spokesperson Sanjay Sharma said.

'Pieces of mangled steel'

Police said the bus was destroyed and at least five other vehicles were damaged. Videos circulated by local news groups showed ambulances rushing to the site and people running as smoke billowed from the damaged vehicles. Debris and body parts littered the road.

The Greater Kashmir newspaper reported that militant group Jaish-e-Mohammed claimed responsibility. A pre-recorded video circulated on social media sites showed the purported attacker in combat clothes and surrounded by guns and grenades.

"The blast was so powerful that one cannot recognize whether the vehicle was a bus or a truck. Just pieces of mangled steel remain," Sharma said.

Authorities suspended movement of security convoys in the Kashmir valley for a day on Friday and Home Minister Rajnath Singh arrived in Srinagar to review security situation.

The attack has raised tensions elsewhere in Hindu-majority India. Hundreds of residents carrying India's national flag in Hindu-dominated Jammu city in the Muslim-majority state burned vehicles and hurled rocks at homes in Muslim neighbourhoods, officials said. Authorities clamped a curfew and appealed for a restraint.

Some people were reported injured in the mob attacks.

The U.S. also specifically singled out Pakistan in its statement condemning the attack.

"The United States calls on Pakistan to end immediately the support and safe haven provided to all terrorist groups operating on its soil, whose only goal is to sow chaos, violence, and terror in the region," the statement from the White House press secretary's office said.

It said the attack strengthened U.S. resolve to bolster counterterrorism co-operation with India.

India and Pakistan have fought three wars since gaining independence from Britain in 1947 and regularly exchange fire along their highly militarized border in Kashmir.