India's military says it has conducted "surgical strikes" against " terrorist units"  in Pakistan it suspects of preparing to infiltrate the part of Kashmir it controls, a claim denounced by the Pakistani army as an "illusion".

Tensions remain high between the two nuclear-armed neighbours following the  killing of 18 Indian soldiers nearly two weeks ago.

Lieutenant General Ranbir Singh, the Indian  army's director general of military operations, t old reporters on Thursday that the strikes were launched on Wednesday following "very specific and credible information that some terrorist units had positioned themselves to infiltrate".

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"Significant casualties have been caused to these terrorists and those who are trying to support them," Singh said, adding that he had called his Pakistani counterpart to inform him of the operation.

"Some terrorist teams had positioned themselves at launch pads along the Line of Control," General Singh said.

An army source told Reuters news agency that the strikes were launched across the Line of Control (LoC), or de facto border that divides the disputed region of Kashmir.

In response to India's statement, Pakistan insisted that the incident was not a "surgical strike" but "cross-border fire".

"The notion of surgical strike linked to alleged terrorists' bases is an illusion being deliberately generated by India to create false effects," the Pakistani military said in a statement.

"This quest by Indian establishment to create media hype by rebranding cross border fire as surgical strike is fabrication of truth."

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It also confirmed that two of its soldiers had been killed in the exchange of fire.

In a statement, Pakistani Prime Minister Nawaz Sharif  "strongly condemned the unprovoked and naked aggression of Indian forces" and vowed that the military was capable of thwarting "any evil design to undermine the sovereignty of Pakistan".

An Indian army spokesman confirmed that there had been shelling from the Pakistani side of the LoC into the Poonch district of Indian-administered Kashmir.

India has also been on a diplomatic drive to isolate its arch rival since the raid on September 18, that India blamed on a Pakistan-based group called Jaish-e Mohammed.

On Tuesday it said Prime Minister Narendra Modi would not attend the South Asian Association for Regional Cooperation (SAARC) summit in Islamabad in November, in a major snub to its neighbour.

Both India and Pakistan claim the disputed Himalayan region in full, but govern over separate parts of it, divided by the heavily militarised LoC.

The Indian-controlled part of the territory has a Muslim majority and there are a number of armed separatist groups fighting New Delhi.

Tensions had already been high in the region since the Indian army killed a leading Kashmiri separatist in a gunfight in early July, sparking a series of protests that have left more than 80 dead and injured thousands others.

Indian Border Security Force soldiers patrol near the fence at the India-Pakistan border in Akhnoor sector [File: EPA]

Source: Agencies