SRINAGAR, India (AP) -- India's prime minister warned Friday of a "crushing response" to the suicide bombing of a paramilitary convoy in Indian-controlled Kashmir which killed 41 people and was the deadliest in the divided region's volatile history.
Prime Minister Narendra Modi placed the blame for Thursday's bombing squarely on neighboring Pakistan, which India accuses of supporting rebels in Kashmir.
"Our neighboring country thinks such terror attacks can weaken us, but their plans will not materialize," he said, adding that government forces have been "given total freedom" to deal with the militants.
"Security forces have been given permission to take decisions about the timing, place and nature of their response," he said.
Pakistan's ruling party rejected Modi's allegation, saying India's ruling party was blaming Pakistan for the attack for political gains in the upcoming national election.
"The Indian allegations against Pakistan over yesterday's incident are part of the election campaign," said Naeemul Haq, a senior leader of the Tehreek-e-Insaf party, which came to power in last year's parliamentary election.
He said the violence in Kashmir was "the result of the brutalities of Indian occupied forces in Kashmir."
The attack has ratcheted up already high tensions between the nuclear-armed neighbors, who both administer parts of the disputed territory but each claim it entirely.
Indian Finance Minister Arun Jaitley announced Friday that New Delhi was withdrawing the most-favored nation trade status given to Pakistan and would take all possible diplomatic steps "to ensure the complete isolation from international community of Pakistan of which incontrovertible evidence is available of having a direct hand in this gruesome terrorist incident."
Pakistan's Foreign Ministry said the country condemns acts of violence anywhere in the world and denied any involvement.
"We strongly reject any insinuation by elements in the Indian media and government that seek to link the attack to Pakistan without investigations," it said in a statement.
Rebels, many of whom want Kashmir united with Pakistan, have been fighting Indian control since 1989. But the Muslim-majority region has experienced renewed attacks and repeated public protests in recent years as a new generation of Kashmiri rebels, especially in the southern parts of the region, has challenged New Delhi's rule with a mixture of violence and social media.
In Thursday's attack, a local Kashmiri militant rammed an explosive-laden van into a bus traveling in the paramilitary convoy. In addition to the dead, the attack wounded nearly two dozen other soldiers, India's paramilitary Central Reserve Police Force spokesman Sanjay Sharma said.
Police said the bus was destroyed and at least five other vehicles were damaged.
The Greater Kashmir newspaper reported that militant group Jaish-e-Mohammed claimed responsibility. A pre-recorded video circulated on social media sites showed the purported attacker in combat clothes and surrounded by guns and grenades.
Authorities suspended movement of security convoys in the Kashmir valley on Friday and Home Minister Rajnath Singh arrived in Srinagar to review the security situation.
The attack has raised tensions elsewhere in Hindu-majority India. Hundreds of residents carrying India's national flag in Hindu-dominated Jammu city in the Muslim-majority state burned vehicles and hurled rocks at homes in Muslim neighborhoods, officials said. Authorities imposed a curfew and appealed for restraint.
Some people were reported injured in the mob attacks.
Nearly 100 protesters chanting slogans such as "Pakistan down, down!" and "Attack Pakistan, Attack," burned an effigy of Pakistani Prime Minister Imran Khan in a park close to India's Parliament in New Delhi. They later dispersed.
The U.S. singled out Pakistan in a statement condemning the attack.
"The United States calls on Pakistan to end immediately the support and safe haven provided to all terrorist groups operating on its soil, whose only goal is to sow chaos, violence, and terror in the region," the statement from the White House press secretary's office said.
It said the attack strengthened U.S. resolve to bolster counterterrorism cooperation with India.
India and Pakistan have fought three wars since gaining independence from Britain in 1947 and regularly exchange fire along their highly militarized border in Kashmir.
Indian soldiers are ubiquitous in Kashmir and local residents make little secret of their fury toward their presence in the Himalayan region.
Most Kashmiris support the rebels' demand that the territory be united either under Pakistani rule or as an independent country, while also participating in civilian street protests against Indian control.
Since 1989, about 70,000 people have been killed in the uprising and the ensuing Indian crackdown. Last year's death toll was the highest since 2009, with at least 260 militants, 160 civilians and 150 government forces killed.