"For the past two years bilateral trade has taken the biggest hit. Pakistani bazars are flooded with Indian goods but they are routed through third-party intermediaries," said Mohammad Shafiq, director of Peshawar-based Ocean pharmaceuticals.

"This just makes the goods horribly expensive. We need to remove these bottlenecks and have strong transport links to move our goods," added Shafiq, a member of an advance party of 35 Pakistanis who took the roundabout route to New Delhi via Dubai because bilateral air links remain suspended.

Illyas Bilour, co-president of the India-Pakistan Chamber of Commerce and Industry (IPCCI), is set to lead a larger group of about 50 business leaders to the Indian capital overland across the Wagah border point later Friday for a six-day visit.

India's leading trade lobby group the Federation of Indian Chambers of Commerce and Industry (FICCI), which is hosting the Pakistani delegation in Delhi, said the visit would help both countries take "the right" policy decisions.

"The Pakistani delegation will have extensive one-to-one meetings on July 7 and 8 with India's Foreign Minister Yashwant Sinha, other top government officials and the captains of Indian industry," said FICCI spokesman Abhinav Kanchan.

Indian businessmen are also likely to raise the issue of Pakistan granting most favoured nation status to India, which would allow them to export almost all items at low rates of import duties.

Currently Pakistan allows imports of only 610 items from India and these are subject to high tariffs, which encourages smuggling.

India has granted most favoured nation status to Pakistan, which means imports are treated the same as goods from any other country enjoying this status.

Islamabad is reluctant to reciprocate, linking it to settlement of the Kashmir dispute, which has been the cause of two of the arch-rivals' three wars since both gained independence in 1947.

Direct official trade has been the biggest casualty of the tense stand-off between them triggered in December 2001 by an attack by gunmen on India's parliament, which prompted New Delhi to sever road, rail and air links with its neighbour.

The two sides then lined their borders with a million troops in offensive positions but withdrew them late last year.

In April, Indian Prime Minister Atal Behari Vajpayee offered a "hand of friendship" to Pakistan, which reciprocated.

Since then, steps have been taken to restore full diplomatic ties and restart the Delhi-Lahore bus link. Restoration of train and bus links are still being discussed.

Until the attack on the New Delhi parliament, two-way trade was worth some 230 million dollars annually, according to the Indo-Pak Chamber of Commerce and Industry.

Despite the severed ties, however, trade through illegal channels has flourished and is now estimated at about 1.5 billion dollars annually and rising, reports said.

The Times of India newspaper said official trade between the two neighbours could go up to four billion dollars in two to three years if ties are normalised.