LAHORE: US Secretary of State Hillary Clinton answered critical questions on US policy at a town hall meeting in Pakistan on Thursday, unveiling cash for universities and calling for peace with India.

The top US diplomat earlier visited a mosque in Lahore on the second day of a visit focused on public diplomacy and strengthening moves towards democracy.

Television footage also showed her praying at the shrine of Muslim saint Bari Shah Latif in Islamabad, following a last-minute schedule swap with a similar monument in Lahore.

Clinton's visit to the second largest city in Pakistan, which has been hit by a series of gun, suicide and grenade attacks this year, has been accompanied by draconian security measures a day after a car bomb killed 104 in Peshawar.

Clinton said the ‘horrific bombing’ in the northwestern city left no doubt that ‘Pakistan is in the midst of a battle against extremists’.

‘This is not your fight alone... You're standing on the frontlines of this battle but we are standing with you,’ she said.

Answering questions from the audience on US intentions and perceived failings, Clinton acknowledged past mistakes but called for a new era and was treated to applause when she voiced opposition to US president George W. Bush.

Following previous announcements of cash for poverty, border security and energy development, she pledged a 45-million-dollar investment for higher education in Pakistan and was to meet business leaders later Thursday.

‘If there were peace between Pakistan and India, and the outstanding issues were resolved, Pakistan would take off like a rocket in terms of economic development,’ Clinton told the hand-picked audience from around the country.

‘Pakistan has such an opportunity to be a power house. You are so strategically located,’ she said — referring to the possibility of trade opening up to the north, east and west and with the Arabian Sea.

Clinton, who says the United States wants to ‘turn the page’ on its relationship with Pakistan, is devoting significant energy to public diplomacy to counter rising Pakistani criticism of the alliance with Washington.

President Barack Obama's administration wants to engage with Pakistan, which traditionally sees the United States as interested only in securing its military cooperation in the fight against the Taliban and Al-Qaeda.

Clinton has already committed 85 million dollars to countering poverty, 125 million dollars to improving Pakistan's woefully inadequate electricity supply and 104 million dollars to law enforcement and border security assistance.