(Recasts with Indian foreign secretary's comments)

By Krittivas Mukherjee

COLOMBO, Aug 1 (Reuters) - India said on Friday that peace talks with Pakistan were at the lowest point in their four-year history after a spate of bombings in Indian cities and at the country's embassy in Kabul.

Indian Foreign Secretary Shiv Shankar Menon said the blasts had "affected the future" of negotiations between the nuclear-armed neighbours.

"If you ask me to describe the state of the dialogue, it is in a place where it hasn't been in the last four years," Menon told reporters.

"We face a situation where things have happened in the recent past which were unfortunate and which quite frankly have affected the future of the dialogue."

India blames Pakistan for a breach of a 2003 ceasefire on its de facto border in disputed Kashmir, and accuses its spy agency of involvement in last month's bomb attack on the Indian embassy in Kabul, in which two senior diplomats were among 58 people killed.

It also says Islamabad is not doing enough to curb anti-Indian groups on Pakistan soil, putting their peace process, begun in 2004, under stress.

There have been three exchanges of border fire this month, the most serious breach since the ceasefire began in 2003.

The Kabul attack, the ceasefire breach, and media speculation about Pakistani links to the bomb attacks on Indian cities have all contributed to the worsening atmosphere.

"That is why we are talking to Pakistan, that's why we are carrying on these conversations," Menon said.

SUMMIT

The premiers of India and Pakistan will meet on the sidelines of a South Asian heads of state summit on Saturday. Pakistan foreign minister Shah Mehmood Qureshi said on Thursday there would be a comprehensive statement on their relations after the meeting.

Menon said India was still investigating the Kabul bomb, which the country's national security advisers had blamed on Pakistan's spy agency.

"It's a jigsaw puzzle. We have some of the pieces. The pieces that we have, I told you where they lead," he said.

The New York Times reported this week that U.S. intelligence agencies had concluded members of Pakistan's spy agency helped plan the July 7 suicide bombing of the Indian embassy in Kabul -- a charge that Qureshi rejected as "rubbish".

Instead, he said trade and cultural similarities are the best ways to improve relations between the uneasy neighbours.

"If the Berlin Wall can fall so can these troubles that we have that are keeping us apart," Qureshi said on Friday at a media seminar on the sidelines of the summit in Colombo.

"I think trade will build new bridges, which are so important between us. I say we have been looking at divergences, look at the convergences we have, look at the language, culture, dress," he said at the seminar also attended by Indian counterpart Pranab Mukherjee. (Editing by Catherine Evans)

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