SRINAGAR, India, March 11 (Reuters) - Hundreds of people demonstrated near Kashmir's summer capital on Sunday, blaming Indian army soldiers for killing two villagers after a firefight with Muslim militants. Kashmir, torn by 17 years of separatist revolt, has witnessed growing protests this year over allegations that Indian security forces have killed innocent civilians in staged gun battles and passed them off as militants. Protesters, shouting "God is great" and demanding an inquiry into the killings, gathered in Aripal village, 50 km (30 miles) south of Kashmir's summer capital, a day after two civilians were killed in a shootout. "They (soldiers) killed two innocents in cold blood," Mohammad Yusuf, a resident of Aripal, said. An Indian army spokesman denied the charge and blamed Muslim militants for the deaths. In a separate incident, the Indian army shot dead three militants on Sunday in a gun battle in south Kashmir. On Saturday night, a policeman was killed and three others wounded in a grenade attack by suspected militants in Srinagar, police said. More than 40,000 people have been killed in the disputed Himalayan region since a bloody rebellion broke out in 1989, officials say. Human rights groups put the toll at about 60,000 dead or missing.