At least 10 people killed by shelling and mortar fire in latest round of intermittent hostilities between India and Pakistan

Thousands of civilians have fled their homes as fighting between India and Pakistan spread on Tuesday along a 125-mile stretch of the disputed border splitting the Himalayan former kingdom of Kashmir.

At least 10 people have been killed by shelling and mortar fire since 31 December in the latest round of intermittent hostilities that have raged since the summer. Though Narendra Modi, India’s prime minister, surprised many by invitating Nawaz Sharif, his Pakistani counterpart, to his inauguration, tensions have been high since peace talks were called off in August.

Indian and Pakistani security officials have not spoken since 1 January, according to DK Pathak, director general of India’s Border Security Force. Pakistan has lost more lives and suffered more damage to property, he said.

“It is not a happy situation and we would like the restoration of normalcy as fast and soon as possible,” Pathak said. “But what can be done? If firing comes from their side we definitely have to respond.”

Pakistan in turn accuses India of killing two of its men in an ambush on New Year’s Eve.

About 10,000 Indians have now been displaced after the new fighting began last week. “We had a narrow escape and there is a war-like situation,” Sham Kumar, 54, from Sherpur village, told Reuters. “Pakistani troops are using long-range weapons. It is the first time we have seen such intense shelling.”

Adding to the tensions, at the weekend the crew of a fishing boat off the coast of India set fire to their craft and apparently killed themselves rather than surrender, according to Indian news reports. Officials said this indicated that the crew were terrorists.

In 2008, Pakistan-based militants landed in the Indian commercial capital, Mumbai, after travelling from Karachi, the southern Pakistani port city, and went on to launch a bloody raid in which more than 160 people died.

The US secretary of state, John Kerry, is expected to visit south Asia in the next few days. He is due to attend an investment summit promoted by Modi at the weekend, and media reports say he will then travel to Islamabad. Barack Obama will make a second official trip to India later in the month, seeking to strengthen ties between the world’s two largest democracies.

India and Pakistan have fought three wars since independence in 1947, and Washington’s financial support to Pakistan’s military and government is a constant irritant in New Delhi, where Kerry is widely seen as pro-Pakistan.

Pakistan announced last week that the US ambassador had said a request had been made to Congress for a $532m (£350m) aid payment under an act co-authored by Kerry in 2009. Washington denied that on Monday, but not before drawing India’s ire.

“How the government of the United States of America decides to spend US taxpayers’ money is entirely its prerogative,” the foreign ministry spokesman Syed Akbaruddin said in a statement. “However, India does not believe that Pakistan is showing ‘sustained commitment’” against Islamist militants, he added.

The state department spokeswoman Jen Psaki said no request had been made to Congress for a payment under the act, which requires Pakistan to cease support for extremist groups such as the Taliban and al-Qaida. However, she said other funds were available to Pakistan.

In 2009, under the Kerry-authored act, the US agreed to give an annual $1.5bn to Pakistan, and in 2013 it handed over the cash under a waiver despite what critics said was a lack of progress in countering Islamist militancy. Funding for 2014, the last year of the four-year plan, has not yet been released, Psaki said.

Washington has for years been trying to encourage a rapprochement between India and Pakistan.

In a statement, the Ministry of External Affairs in Islamabad said Pakistan was “opposed to terrorism in all its forms and manifestations and has been the biggest victim of terrorism”.

It added: “The people and government of Pakistan are determined to eradicate this menace from our territory … On the other hand, the people of Pakistan see the escalation of tension by India … through continuous unprovoked firing and targeting of civilians, as an attempt to distract our armed forces from its valiant mission against all terrorists. The baseless and preposterous Indian allegations regarding the so-called ‘terror boat’ from Pakistan are also in the same vein.”