"I can never compromise on the interests of Pakistan, never will we sell out, never will we buckle under any pressure and there is no pressure on Pakistan," he said at the Aiwan-e-Sadr.
The President expressed optimism vis-à-vis finding a resolution of the issue, saying he sees light at the end of the tunnel as there is a growing desire and realisation among the people of two countries that its peaceful settlement will lead to tremendous development of the region.
"We have to find a way forward," he said.
The President said Kashmiris have to be part of the solution.
The President said he had not spelt out any solution to the dispute when he said Pakistani media should initiate a meaningful public debate on possible options.
On the issue of holding two offices, the President said it is not a personal matter but should be viewed in a realistic light in the larger context of Pakistan's meeting internal and external challenges.
"Pakistan needs unity and stability, it needs a close harmony between politicians, bureaucracy and the military to keep moving forward in a sustainable manner on the path of socio-economic progress and also meet various internal and external challenges."
He said the issue of holding two offices is not personal as he believes in drawing respect from hearts.
The President referred to various challenges facing the country and appealed to intellectuals to join hands with the government in weeding out the menace of extremism from the society.
"We have to act. We cannot afford to be spectators; the moderate majority has to stop extremist minority; it is in Pakistan's interest to curb extremism and terrorism.
"We have to bring about a societal transformation, moderates have to rise up to suppress extremism and make Pakistan a moderate progressive Islamic state," he underlined.
He informed the galaxy of writers, poets, authors and leading men of letters that Pakistan has effectively countered the recent misperceptions vis-à-vis unrest in Afghanistan, cross-border infiltration and nuclear proliferation and now nobody is casting aspersions on the country.
The President said having steered Pakistan out of economic troubles in the last five years, the government is now focused on poverty reduction and socio-economic development across the country.
Referring to a host of steps including agricultural incentives to farmers, he said these would pave the way for higher agricultural growth.
He said mega projects like brick-lining of water courses throughout the country, construction of water reservoirs and materialisation of communication infrastructure are providing employment opportunities to millions of people in rural areas.
In cities, he said, the construction and information technology are booming sectors. He also referred to robust 18 percent growth of the industrial sector during the last fiscal year, saying the country is moving forward on the path of sustainable development.
President Musharraf referred to Pakistan's fast-growing water requirements for sustainable agricultural and industrial development and said the country needs four large dams - Kalabagh, Bhasha, Skardu and Akhori - over the next three to four decades.
"We have to take serious decisions on the construction of large reservoirs."
The President said he will visit Sindh and inform the people that the construction of a large dam would be in their interest.
"We will address all concerns in this regard."
On Pakistan's place in the Muslim Ummah, he said, the country has to play a leading rote in regard to meeting challenges facing it.
Pakistan, he said, is contributing its bid in making the Organisation of Islamic Conference a vibrant body, capable of meeting the challenges of 21st century.
"Pakistan has a lot of opportunities at this critical time, if we seize the opportunities we will play an important role for the well-being of the Ummah and in the world at large and carve out a high status for our country. All of us should strive for Pakistan's rise. We owe this to our country."