Pakistan's Prime Minister on Thursday said his government would release an Indian fighter pilot as a gesture of peace amid escalating military tensions between the two countries.

Imran Khan made the announcement while addressing the joint session of Pakistani parliament, a day after Indian Air Force Wing Commander Abhinandan Varthaman was captured by the Pakistan Army after his jet, MiG21, was shot down inside Pakistani territory.

"We have an Indian pilot. As a peace gesture we will be releasing him tomorrow (Friday)," Khan said.

The prime minister said the move to release the pilot was his government's first step to open peace talks with India amid fears of military face-off between the two nuclear neighbors.

In his address, Khan said he had unsuccessfully tried to speak with his Indian counterpart Narendra Modi on Wednesday to tell him that Pakistan did not want to escalate tensions with its neighbor.

But, he said, "Our push for de-escalation doesn't mean we are scared".

The two countries claimed to have launched cross-border aerial strikes and shooting down of each other's fighter planes in the disputed Kashmir region, as military and diplomatic tensions between the South Asian nuclear powers escalated over the last few days.

The crisis between the two countries dramatically worsened after a suicide bomber rammed an explosives-laden vehicle into a bus carrying Indian paramilitary troopers in Kashmir on Feb. 14.

The attack that left 42 troopers dead was claimed by the Jaish-e-Mohammed militant group based in Pakistan.

India claimed that its warplanes bombed a Jaish guerilla training camp in Pakistan on Tuesday and killed "a very large number of JeM terrorists, trainers, senior commanders and groups of jihadis who were being trained for fidayeen (suicide) action".

Islamabad denied the casualty claims, but admitted that Indian fighter jets dropped four bombs that fell in open spaces across the Line of Control - a de facto border that divides the Kashmir region.

India has repeatedly accused Pakistan of supporting cross-border terrorism and of allowing and sponsoring the operation of terrorist groups in its territory to attack Indian targets and to provoke separatist protests among the Kashmiri population.

Kashmir, one of the most militarized territories in the world, has been the subject of a decades-long sovereignty dispute between Pakistan and India. The armed insurgency in the Himalayan region has left tens of thousands of people dead since it erupted in 1989.