Negotiations on Kashmir have been stalled for several years
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Top Indian and Pakistani officials have approved proposals aimed at resolving the decades-long dispute over Kashmir, and at normalising bilateral relations.
After talks in Delhi, they issued a joint statement saying the draft proposals would be now presented to the foreign ministers of the two countries.
The ministers are due to meet in Delhi on Sunday for two days of talks.
The joint statement stressed that the talks between South Asia's two nuclear powers had been constructive.
The discussions between Indian Foreign Secretary Shyam Saran and his Pakistani counterpart, Riaz Khokhar, had been "productive and had taken place in a cordial and constructive atmosphere", the statement said.
They paved the way for the talks between Indian Foreign Minister Natwar Singh and his Pakistani counterpart, Khurshid Mahmud Kasuri in Delhi.
In the past, India has repeatedly accused Pakistan of failing to do enough to stop the infiltration of separatist rebels into Indian-administered Kashmir.
Pakistan has said India is unwilling to engage in serious dialogue.
Only two years ago, the two countries almost went to war over Kashmir for a fourth time since independence in 1947.
Transport move
Details of the new plans were not immediately available but India is reported to be exploring the possibility of easing restrictions along the Line of Control (LoC) which divides Indian and Pakistani-administered Kashmir.
That could include allowing transport and other links between people living on either side of the divide.
The LoC was established by the United Nations in 1949.
A move to launch a bus service linking the capitals of Indian and Pakistani Kashmir has been stalled because of differences over the kind of identity papers to be used by the passengers.
India wants travellers to show passports. Pakistan says that would mean recognising the LoC as the legal border between the two countries.
Frustration
The BBC's Zaffar Abbas in Islamabad says that Pakistan is getting frustrated at the slow pace of the talks and would like discussions on the substantive issues rather than on confidence-building measures such as improved diplomatic and transport links.
But most Kashmiris have little hope that the talks will help resolve the long-running and seemingly intractable problem.
"I don't know if I will be alive to see the resolution of the Kashmir issue," Shakeela Akhtar, a housewife and mother, told Reuters news agency.
"I pray the day comes soon."
Relations between the neighbours have improved since a peace initiative between Pakistani President Pervez Musharraf and former Indian Prime Minister Atal Behari Vajpayee launched in January.
A number of confidence-building measures have been introduced over the past year, including a resumption of rail, air and bus links and a strengthening of diplomatic ties.