Hailing Pakistan as "an important friend" of the United States, Bush made the comments at the end of a three-day visit to India.

"I will meet with President Musharraf to discuss Pakistan's vital cooperation in the war on terror and our effort to foster economic and political development so we could reduce the appeal of radical Islam," Bush said before heading to Islamabad.

"I believe a prosperous democratic Pakistan would be a steadfast partner for America and a peaceful neighbour for India and a force for freedom and moderation in the Arab world," he said, speaking in New Delhi.

Bush noted that there was a time when "America's good relations with Pakistan would have been a source of concern here in India" but added, "that day has past."

India was "better off because America has a close relation with Pakistan and Pakistan is better off because America has a close relation with India."

The nuclear-armed South Asian neighbours have been engaged in a slow-moving peace process since early 2004 aimed at settling their nearly six-decade-old feud over the Himalayan region of Kashmir, trigger of two of their three wars.

The United States has been pursuing a delicate balancing act in seeking to boost relations with India at the same time as preserving its ties with Pakistan, a key ally in Washington's "war on terror".