"Today we are taking up Kashmir," an Indian official said before the start of the meeting in New Delhi between Pakistan Foreign Secretary Riaz Mohammed Khan and his Indian counterpart, Shyam Saran.

On Tuesday the two top officials met to review progress in a peace process between the arch-rivals started two years ago. They concluded afterwards that the ongoing talks had helped build trust.

Officials said the two sides had also made fresh proposals on ways to further boost confidence, with India suggesting that neither side build "new posts and defence works" along their disputed border in Kashmir and that senior commanders from both sides have periodic meetings.

Pakistan proposed that military strike formations of the rival armies should not be "permanently relocated" to forward locations -- a situation in which troops are eyeball-to-eyeball along the frontier.

It also suggested expert-level talks to prevent incidents at sea and urged steps eventually to make South Asia a zone free of ballistic missiles.

The proposals were expected to be discussed briefly Wednesday before being referred to various forums set up under what is termed the Composite Dialogue between the neighbours.

But the main focus Wednesday, officials said, would be on Kashmir.

Pakistan foreign ministry spokeswoman Tasnim Aslam said Khan had told junior Indian foreign minister E. Ahamed during a courtesy call that "Pakistan was looking forward to movement on the Kashmir dispute."

India and Pakistan each administer part of the Himalayan region but claim it in full. The dispute has kept ties between the neighbours tense for almost six decades and triggered two of their three wars since 1947.

However the rival armies have maintained a ceasefire along the heavily-militarised Line of Control in Kashmir since November 2003.

India has said that "short of redrawing borders" in Kashmir, it is ready to consider all suggestions for a solution. But it has rejected Pakistani proposals such as independence or joint control of the Himalayan region, or demilitarising it and placing sections under a United Nations mandate.

Indicating a possible way forward, Indian foreign ministry spokesman Navtej Sarna said earlier in the week Khan and Saran would discuss steps to increase contacts between the people of divided Kashmir.

These include a proposed bus service between Poonch in Indian Kashmir and Rawalakot in the Pakistani zone and a truck service between Indian Kashmir's capital Srinagar and Muzaffarabad in Pakistani Kashmir.

A bus service between Srinagar and Muzaffarabad began last April after almost 60 years in what was seen as the first tangible fruits of the peace process.

Opening more points for Kashmiris to meet each other and allowing pilgrims to cross the disputed frontier are also on the table, Sarna said.

Five meeting points were opened in November after the October 8 South Asian earthquake which claimed some 75,000 lives in the region.

Sarna said "terrorism" or violence by militants groups was an issue discussed on Tuesday.

India says Pakistan has not kept a promise to stop violence by Islamic militants based in Pakistani-held territory who are battling New Delhi's rule in Kashmir.

More than 40,000 people have been killed since the start of an insurgency in Indian Kashmir in 1989.

Islamabad says it has clamped down on militant outfits and has asked New Delhi to cut troop levels in Kashmir.