Indian Prime Minister Narendra Modi will not attend a regional summit of South Asian leaders in Pakistan in November because of increasing cross-border attacks in the region, the foreign ministry says.

India blames Pakistan for a deadly assault on an army base in the disputed Himalayan region of Kashmir this month that has escalated tensions between the rivals.

India says a group of militants sneaked across the de facto border that separates the countries and killed 18 soldiers on September 18, the biggest loss of life for Indian security forces in the region for 14 years.

Pakistan rejects the accusation and says India needs to conduct a proper investigation before it apportions blame.

Modi was scheduled to attend the South Asian Association for Regional Cooperation (SAARC) summit.

But the Indian foreign ministry said in a statement: "Increasing cross-border terrorist attacks in the region and growing interference in the internal affairs of Member States by one country have created an environment that is not conducive to the successful holding of the 19th SAARC Summit."

"In the prevailing circumstances, the Government of India is unable to participate in the proposed summit in Islamabad."

Pakistan's foreign ministry called India's announcement "unfortunate" and said it remained committed to peace and regional cooperation. In a statement, it accused India of meddling in the country's internal matters.

India said it understood that some other SAARC members were apprehensive about attending but it did not name them.

The decision to cancel Modi's visit is the latest attempt by India to try to pressure Pakistan diplomatically. India has said it will respond to the Kashmir attack but experts say it is short of military options because of the risk of escalation.

India on Monday began a campaign to isolate Pakistan at the United Nations and Modi told officials India should exploit more of the water from three rivers that flow into its neighbour, potentially cutting water levels downstream.

Pakistan's top foreign official said on Tuesday it would treat it as "an act of war" if India revoked the Indus Water Treaty regulating river flows.

Indian and Pakistani mistrust has long undermined South Asian regional cooperation and is widely blamed for the poor performance of SAARC, which successive Indian leaders hoped would help South Asia become a viable economic counterweight to China.

Divided between India and Pakistan since 1947, the nuclear flashpoint of Kashmir lies at the heart of the countries' rivalry. India also faces an insurgency against its rule in the portion it controls, its only Muslim-majority state.