New Delhi: India and Pakistan on Wednesday agreed to keep up their engagement, bolstering their recently resumed peace process with confidence-building measures to reduce the trust deficit caused by the 2008 Mumbai attacks, but simmering differences were apparent, especially over Kashmir.

While the overall tenor of the talks was positive, Indian foreign secretary Nirupama Rao described the agenda ahead as one of "hope" tempered with "cautious optimism".

A joint statement at the end of talks between Indian foreign minister S.M. Krishna and his Pakistan counterpart Hina Rabbani Khar said the dialogue was held in a "candid, cordial and constructive atmosphere" signifying exchanges on key issues such as terrorism, which India says is its central concern vis-…-vis Pakistan, to Kashmir, which Pakistan describes as the core dispute between the two countries.

The confidence-building steps announced include increasing the number of days traders are allowed to do business across the de facto Line of Control (LoC) border between India and Pakistan in Kashmir from two days a week to four, strengthening infrastructure for trade, including upgrading communication systems, expanding travel to include tourism and pilgrimages, increasing the frequency of the buses connecting Srinagar with Muzaffarabad and Poonch with Rawalakot, and relaxing permit conditions for travel across the LoC.