Kayani said ‘peaceful coexistence’ India was vital to both countries and the welfare of the people should be a priority.
"Peaceful coexistence between the two neighbours is very important so that everybody can concentrate on the well-being of the people," he told reporters.
Kayani was speaking at Skardu airport after visiting the Gayari army base, which was hit by a massive avalanche on April 7.
Kayani said soldiers would do their duty come what may, but defending borders should not be the country's sole priority.
"We in the army understand very well that there should be a very good balance between defence and development. You cannot be spending on defence alone and forgetting about development," he said.
"Ultimately the security of a country is not only that you secure boundaries and borders but it is when people that live in the country feel happy, their needs are being met. Only in that case will a country be truly safe."
He said national security should be a comprehensive concept. "And therefore we would like to spend less on defence, definitely," he said.
"Any country should do the same -- more focus should be on the welfare of the people."