Mrs Rao said the sides would keep in touch
India says it has taken a "first step" towards rebuilding trust with Pakistan after their first formal talks since the 2008 Mumbai (Bombay) attacks.
"We have agreed to remain in touch," India's top diplomat said in Delhi.
Her counterpart said Pakistan was as concerned about terrorism as India. Neither said if more talks are planned.
India put peace talks on hold after the attacks, blaming them on Pakistan-based militants. Pakistan admitted they had been partly planned on its soil.
Analysts had not expected any major breakthrough during the one-day meeting in Delhi.
By Soutik Biswas
BBC News, Delhi
Nobody expected any breakthroughs, and hopes for progress between the feuding neighbours had rarely been lower in recent times.
Differences over thorny issues like militancy and Kashmir remain. The trust and confidence painstakingly won over years of negotiations after a ceasefire in 2004 must first be regained before any real progress can be made.
It is going to be painfully slow just to get back to where the two sides were before the attacks on Mumbai. According to many reports, the rivals had been near to a breakthrough on Kashmir when the attacks took place.
History - the removal of President Pervez Musharraf - and militancy conspired almost to negate the gains of dialogue. This just proves how fragile the relationship remains and how difficult it is even to regain lost ground.
On the eve of the talks, the two states exchanged terse allegations over the disputed territory of Kashmir which lies at the heart of their decades-old dispute.
Addressing a news conference after Thursday's meeting, Indian Foreign Secretary Nirupama Rao said her government had approached the talks with "open minds, fully conscious of the trust deficit between the two countries".
"Talks were candid. There was good chemistry between the two delegations. We had useful discussions," she told reporters.
She said Pakistan wanted to resume the so-called "composite dialogue" - covering a range of key issues - but India felt the time was not yet right to do so "because the climate of trust and confidence has to be built up".
Mrs Rao added: "I told them about our concerns about terrorism emanating from Pakistan. We agreed on step-by-step engagement.
"While acknowledging steps taken by Pakistan to bring the conspirators in the Mumbai attacks to book, I stressed that expeditious action should be taken on this issue."
Many in India oppose resuming peace talks, but the government has been able to point to Pakistan's trial of suspects alleged to have plotted the attack as evidence that Islamabad is taking action.
Indian and Pakistani leaders have met since the Mumbai violence, but these were the first formal peace talks to be held - and came at India's invitation.
At a separate news conference Pakistani Foreign Secretary Salman Bashir said his government welcomed India's focus on terrorism.
Security - India wants action against militants. Pakistan denies supporting them
Kashmir - the dispute has sparked two wars since 1947
Water - India denies Pakistani claims it is diverting rivers
Siachen glacier - known as the world's highest battlefield
Sir Creek - boundary dispute over estuary into Arabian Sea
Afghanistan - Pakistan concerned at rising Indian presence
"It's a pressing priority, not just for India, but more so for Pakistan," he told reporters. "Terrorism is a blight that needs to be exterminated."
Hundreds of people have been killed in recent months in Pakistan in suicide bombings and other attacks launched by the Taliban.
Mr Bashir said: "We have suffered many, many hundreds of Mumbais. Anyone who thinks Pakistan would be dismissive of this problem, does not have his facts right."
He said his visit was aimed at bridging a "huge gap" between expectations and distrust.
"Pakistan is prepared to move forward, to improve our relationship with India and turn a new chapter," he said, but he stressed that the core issue of Kashmir had to be resolved.
Correspondents say the meeting could eventually pave the way for the resumption of the formal peace process broken off after the Mumbai attacks, in which 174 people were killed, nine of them gunmen.
Diplomatic sources say the US has encouraged the two sides to return to talks as it feels a reduction in tensions with India would allow Pakistani forces to concentrate more on fighting militants near the border with Afghanistan.