In a year-end review of the foreign policy and India's relations with its neighbours, he said, "India lives in a difficult neighbourhood and national security and terrorism originating from across our borders would remain a major challenge in 2010."
When asked about the China's border incursions issue and issuance of separate visas to Kashmiris, he said, "We are indeed concerned about some of these developments."
He also emphasised that China's continued supply of weapons to Pakistan and activities of Chinese companies in PoK were a matter of concern and India was talking about all these issues with China.
Explaining why India sees these activities in PoK as 'illegal', Krishna said, "Jammu Kashmir is an integral part of the country and neither Pakistan nor China have a locus standi there."
"Still India did not see China in antagonistic terms as it believes that there is enough space for both to develop in a mutually supportive manner," Krishna said.
On the outlook for 2010, he said, "I am optimistic about the progress in our bilateral ties with China in the year ahead."