He said the internal situation in Pakistan is such that the country needs to keep alive the "tension" over the Kashmir issue, adding India had made sustained efforts to create an environment for talks.
Jaitley also defended an Army officer who had tied a man to a jeep as a human shield against stone-pelters in Kashmir last month, saying he must have taken the decision considering the ground realities.
"There is domination of our forces along LoC and the international border. All required steps are being taken by the Army to stop infiltration," Jaitley told DD News.
He also said Pakistan will have to pay a price for acts like beheading of Indian soldiers.
The defence minister said India made every effort to create an environment for talks but then the attacks on Pathankot and Uri military bases had taken place. He also cited mutilation of two soldiers by Pakistan and death sentence handed to Kulbhushan Jadhav by a Pakistani military court.
"We have domination over the LoC and IB and it will continue," he said.
Jaitley also asserted that India is not adopting softer approach in dealing with cross border terrorism.
Asked whether there is lack of coordination between Defence Ministry and armed forces, he replied in negative.
He said the strategic partnership model will boost the domestic defence industry.
"You cannot go around the world buying military equipment just when they are needed the most," he said.
The new policy is expected to attract billions of dollars of investment in defence manufacturing by private defence majors including leading foreign firms.
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