Top diplomats of the two countries agreed that two-year-old peace talks had helped boost relations and that they were optimistic despite fears that the dialogue had reached a stalemate.

But they stuck to familiar positions on the territorial dispute over Kashmir -- at the heart of India-Pakistan rivalry -- and what New Delhi says is terrorist violence emanating from militant groups based in Pakistan.

"The two foreign secretaries ... expressed satisfaction at the progress made during the composite dialogue process," a joint statement said at the end of two days of talks between the heads of the two foreign ministries.

"The two sides reiterated their resolve to carry forward the peace process and maintain its momentum," it said.

The arch rivals launched new peace moves after teetering near the brink of another war over Kashmir in 2002. The dispute over the Himalayan region has been the cause of two of three wars between the neighbours.

Ties have since improved significantly with the resumption of several transport links between the two sides and decisions to reduce military tensions and improve communication channels as a truce between the two armies holds successfully.

The two sides are yet to tackle the Kashmir dispute. The peace process ran into trouble around September last year when Pakistan accused India of dragging its feet over Kashmir while New Delhi said Islamabad was not keeping its promise to curb anti-Indian militants.