NEW DELHI (AFP) -- Indian Prime Minister Narendra Modi said Thursday his powderkeg move to strip the disputed Kashmir region of its autonomy was necessary to stop "terrorism", as Pakistan voiced further outrage and the UN chief urged "maximum restraint."

Modi's Hindu-nationalist government imposed direct rule on the Indian held portion of Kashmir on Monday, setting off a new crisis in one of the world's most volatile security flashpoints.

Speaking for the first time since the move, and with the people of Kashmir enduring a military lockdown, Modi hailed it as a "historic decision" that would bring peace to the region.

"Friends, I have full belief that we will be able to free Jammu and Kashmir from terrorism and separatism under this system," Modi said in a televised address.

He accused Pakistan of using the special status "as a weapon against the country to inflame the passions of some people" against India.

Modi said the special status had "not given anything other than terrorism, separatism, nepotism and big corruption".

But with Kashmir now fully part of the Indian union, the region would enjoy more jobs, corruption and red-tape, he said, adding that key infrastructure projects would be expedited.

Kashmir has been divided between Pakistan and India since independence from the British in 1947.

The contesting claims over Kashmir have led to two of the three wars between the neighbours.

Pakistan said Thursday it would not take military action this time.

"Pakistan is not looking at the military option. We are rather looking at political, diplomatic, and legal options to deal with the prevailing situation," Pakistan Foreign Minister Shah Mehmood Qureshi said at a press conference in Islamabad.

Tensions remained high, however, with Qureshi's comments coming on the heels of a decision by Islamabad to downgrade its diplomatic ties with India, suspend bilateral trade, and expel the country's envoy.

Pakistan has also promised to take the matter to the United Nations Security Council.

Pakistani Prime Minister Imran Khan displayed his rage in a series of tweets calling for international action to stop India.

"What should be obvious is the int community will be witnessing the genocide of the Kashmiris," Khan posted in one tweet.

United Nations chief Antonio Guterres called Thursday on India and Pakistan "to refrain from taking steps that could affect the status of Jammu and Kashmir".

"The Secretary-General has been following the situation in Jammu and Kashmir with concern and makes an appeal for maximum restraint," his spokesperson said.  

- Hundreds detained -

In India, a petition was filed to the Indian Supreme Court by an activist challenging the curfew in Kashmir, which was imposed to suppress any unrest in response to the loss of autonomy.

Activist Tahseen Poonawala and lawyer M.L. Sharma asked the Supreme Court to lift the lockdown and release people who have been detained as part of the crackdown.

University professors, business leaders and activists are among the 560 people rounded up by authorities and taken to makeshift detention centres -- some during midnight raids -- in the cities of Srinagar, Baramulla and Gurez, the Press Trust of India and the Indian Express reported.

ANI news agency also reported that the leader of the opposition in the upper house, Ghulam Nabi Azad from the Congress party, was turned back at Srinagar airport when he flew to the city.

Pakistani Nobel laureate Malala Yousafzai, who was shot in the head by the Taliban in 2012, on Thursday tweeted that she was "worried about the safety of the Kashmiri children and women, the most vulnerable to violence and the most likely to suffer losses in conflict".

"I believe we all can live in peace," she added, in comments that were supported and criticised by Twitter users from India and Pakistan.

Tens of thousands of Indian troops are enforcing the lockdown which includes no internet or phone services, and are allowing only limited movement on streets usually bustling with tourists flocking to the picturesque valley.

Experts warn that the valley is likely to erupt in anger at the government's shock unilateral move once the restrictions are lifted, which could come on the Muslim festival of Eid on Monday.

Late Wednesday India's aviation security agency advised airports across the country to step up security as "civil security has emerged as a soft target for terrorist attacks" on the back of the Kashmir move. (AFP)