External affairs minister S Jaishankar has said India is willing to talk to Pakistan but not to “terroristan”, a reference to Islamabad’s role in sponsoring and supporting terrorism against New Delhi.

Pakistan has created an “entire industry of terrorism” to fuel unrest in Kashmir and India cannot talk to a country that sponsors terror, Jaishankar said while addressing an audience at the Asia Society on Tuesday.

“They (Pakistan) have to accept the model which they have built for themselves, no longer works. You cannot, in this day and age, conduct policy using terrorism as a legitimate instrument of statecraft…We have no problem in talking to Pakistan, but we have a problem talking to terroristan,” he said during an interview with Asia Society’s president Kevin Rudd on Tuesday.

Jaishankar said India’s decision to revoke Jammu and Kashmir’s special status and split the state into two union territories drew a reaction from only Pakistan and China. Pakistan downgraded diplomatic ties with India and China voiced “serious concern” over the situation in Kashmir.

He emphasised that revoking Article 370 of the constitution had no implications for India’s external borders.

“We are sort of reformatting this within our existing boundaries…I think, for Pakistan, it was a country which has really created an entire industry of terrorism to deal with the Kashmir issue. In my view, it’s actually bigger than Kashmir, I think they have created it for India,” he said.

Pakistan sees its “investment” of 70 years undercut by India’s new policy and has reacted with anger and frustration, he said. The lack of development and opportunities in Kashmir over the years had “created a sense of alienation, alienation to separatism, separatism used for terrorism”, he added.

Asked what Pakistan needs to do as a precondition for talks on Kashmir, Jaishankar replied, “I think we are getting this wrong. First of all, Pakistan has to do something for its own good and if it does that, it would enable a normal neighbourly relationship with India.”

He pointed out there were other differences between the two sides besides the Kashmir issue.

“We had an attack on Mumbai. The last time I checked, Mumbai was not a part of Kashmir. So if Pakistani terrorists can attack states and regions which are far removed from Kashmir, we have got to recognise there is a bigger problem out there,” he said.

Jaishankar further said: “There is a fundamental issue there which they need to understand and we need to encourage them to do – that is, to move away from terrorism.”

China had “misread” the revocation of Article 370 of the Constitution, adding the reorganisation of Jammu and Kashmir will have no impact on China. “I went a few days after the legislation to China and explained to them that as far as they were concerned, nothing had changed. India’s boundary had not changed, the Line of Actual Control had not changed,” he said.