In a question and answer session that followed her address to the Atlantic Council in Washington on 'India and the United States: The Next Phase,' Shankar however called for greater accountability over the security assistance provided by the US to Pakistan.
Musharraf in admitting that he had violated the rules governing the US of such American military largesse, had justified his action saying he did so "in the best interest of Pakistan," and "did not care," if Washington was angered by his disclosures.
Shankar asked what the government of India planned to do in response to Musharraf's purported actions in diverting this US military assistance, said, "I don't know we are not the ones who gave the aid to Pakistan. It's more for the government of the United States to see how they need to respond to this."
"But as far as India is concerned," she said, "we support the economic and developmental assistance, which has been given to Pakistan because we share the objective of a stable and modern Pakistan."
However, Shankar added, "We do feel that in the security field, the assistance should be more tightly focused on building counter-insurgency capability rather that conventional defense equipment which can be diverted for other purposes. And, of course, there may be need for greater accountability in terms of how this defense assistance is being used."
State Department spokesman Ian Kelly on Monday when asked about Musharraf's revelations said, "First of all, Musharraf is a private citizen. He provided very few details, so we would refer you to him to get these details."
But, he said, "I would just say as a general principle, we take very seriously any allegation of using US-origin military assistance for purposes other than we had already agreed to and that we had intended them for."
When pressed if there is any recourse and if the US was concerned over the diplomatic implications of what Musharraf had said, Kelly reiterated, "It was a very broad statement with no specifics that I know of. And, we would just need to have more details about that."
But when asked if the Obama administration intended to conduct an investigation, the spokesman said, "I am not sure," but repeated, "As I say, we take these things seriously."
Kelly said he was also unaware of any specific instances of such violations by Pakistan. "Not that I am aware of, no," he said.
Meanwhile, Shankar asked if India was concerned over calls in some quarters for the US to withdraw its troops from Afghanistan and how this could affect stability in the region, said, "We believe that bringing peace, stability and moderation to this region will require sustained engagement and will not be a short-term enterprise."
"We do think that the imperative to stay the course is strong and we would hope that this is something which the US will find its way to do," she said.
Shankar said where India's involvement in Afghanistan is concerned, "We do not have any security role in Afghanistan nor do we seek one because we don't want to complicate the situation in reference to regional sensitivities."
But she said, "We do have a fairly significant development role and have committed over $1.2 billion worth of developmental assistance to Afghanistan."
Asked if India perceived any suspicion by China over New Delhi's growing strategic partnership with the US and if the relationship with the US is any way is a hedge against a China which in the future may not go in the direction which both the US and India hoped it would, Shankar said, "I don't think the Indian-US relationship is directed against any country."
She had earlier emphasized this particular point in her prepared remarks too.
But the envoy acknowledged that "there is a degree of fluidity in the international situation at present where all countries seek avenues of productive cooperation with other major powers as well as emerging powers, and at the same time seek to ensure better balances."
"So, I would say that a bit of both operate," she added.
Shankar dismissed any hope that may be entertained in some quarters that the burgeoning US-India strategic partnership could be a catalyst for India-Pakistan rapprochement.
She asserted that India seeks to deal with Pakistan "on a bilateral basis and we are comfortable with that."
Shankar asked if the issue of the Kashmir imbroglio would figure on the agenda of Prime Minister Manmohan Singh when he meets President Obama on November 24 in the White House, rubbished any such expectation.
"Kashmir is something we are dealing with domestically within India," she said.
"The situation in Kashmir has been better than it has been for many years," she said and referred to the elections held there, which preceded the national elections and said that despite calls for a boycott, over 60 percent had turned out to vote.
Shankar acknowledged, "Yes, we see stepped up efforts at infiltration across the Line of Control unfortunately this year and that is a cause for concern."
"As far as the India and Pakistan dialogue is concerned, our government has made clear that we would need to see more definitive steps from Pakistan to address our concerns on terrorism before we can really move toward a fruitful dialogue," she said.