"We live in a dangerous and volatile neighbourhood. We must understand they are our neighbours. We must respect that and can't wish that away. While we must deal with incidents that have taken place recently firmly, there are others in the region who want a democratic and economically developed region, and we must keep that in mind," Dr Singh said at the Congress's two-day Chintan Shivir in Jaipur.
External Affairs Minister Salman Khurshid too had said this morning that India would not let the LoC flare-up upset the peace process with Pakistan, but Congress president Sonia Gandhi emphasised that dialogue with Pakistan must be based on accepted principles of civilised behaviour.
"Better relations with our immediate neighbours will not only make for regional peace, they will also have a positive impact on some of our own border states. But let us be clear. Our dialogue must be based on accepted principles of civilised behaviour. We will never compromise on our vigil and preparedness to deal with terrorism and threats on our borders," Mrs Gandhi said.
Earlier this week, the Prime Minister had made it clear to Pakistan that it "cannot be business as usual" until those who mutilated the bodies of two Indian soldiers killed in Pakistani firing, beheading one of them, were brought to book.
Pakistan denies any role of its troops in the savage treatment of the bodies of Lance Naik Hemraj Singh and Sudhakar Singh, but it has condemned the act and offered talks at the foreign ministers' level to help de-escalate the tension. The suggestion was first made by Pakistan Foreign Minister Hina Rabbani Khar and then by the country's High Commissioner to India Salman Bashir yesterday.
India is yet to respond directly to Pakistan's offer though Mr Khurshid said on Friday that the government will "respond positively" to what Pakistan High Commissioner had said.
"The peace process has been something in which a lot of time has been invested and we won't let these incidents that have happened recently affect it," the minister told NDTV.
There has been no firing reported at the border since Wednesday night, when senior military officers of India and Pakistan agreed to exercise restraint.
Tension between India and Pakistan peaked last week after the two Indian soldiers were killed in firing by Pakistani troops. In the next few days, the Indian Army reported repeated ceasefire violations by Pakistani troops along the 742-km LoC and said it had only retaliated.
Pakistan has denied all of India's charges and instead accused it of initiating aggression; it claims that three of its soldiers have been killed by Indian troops.
In the wake of the escalation of the tension along the LoC, two phases of the much-hyped Indo-Pak liberal visa agreement that have not been operationalised yet have been put on hold. The tension has also hit sporting ties between the two countries. Nine hockey players who were signed up for the Hockey India League being played now were asked to return this week.