Noting that there are going to be some elements in Pakistan that are affiliated with Taliban, Al Qaeda and LeT, he said they are "irreconcilable" and there needs to be a military response to those who perpetrate violence like they did in Mumbai and New York in a "significant, ongoing" way.
Obama also observed that it would surprise Indians when he says this that it is in India's interest that Pakistan remains "peaceful, stable and prosperous" and that the US will work with Islamabad to reject extremism which is a "cancer" which threatens to engulf it.
Interacting with students of St Xaviers College here in a typical US town-hall style meeting, he expressed confidence that in time, trust develops between India and Pakistan and dialogue begins perhaps from "less controversial issues building upto more controversial issues".
"India and Pakistan can prosper and live side by side, this will not happen tomorrow but needs to be the ultimate goal. The US can be a partner but cannot impose this process. India and Pakistan have their own understanding," he said.
He made these comments when a girl student asked why Pakistan was not being declared a terrorist state by the US.
Obama reacted that it was a good question and said "I must admit that I was expecting it".