However, the progress they reported was largely on peripheral issues while on Kashmir they repeated long-held differences.
Islamabad categorically stated that Kashmir dispute will have to be resolved sooner or later to ensure durable peace in South Asia.
Addressing a joint press conference here at Hyderabad House on Monday afternoon along with his Indian counterpart Natwar Singh, Pakistan's Foreign Minister Khurshid Mahmud Kasuri said: "We are not imposing any pre-condition, but it is a matter of common sense. It is a matter of historical experience. We want to put our relations on an even keel. We have to tackle issue of Jammu and Kashmir."
Kasuri said the joint statement would be issued on September 6 along with list of agreements, reached during the talks between the two foreign ministers.
Indian External Affairs Minister Natwar Singh said both sides decided to continue cease-fire, which is in force since November 25 last year, adding both countries also decided to have technical-level talks on Munabao-Kokhrapar rail-link in October-November this year.
He said he raised India's concerns what New Delhi calls cross-border terrorism at the talks, adding both countries decided to discuss conventional and nuclear confidence building measures (CBMs), and the two sides also decided that the Coast Guards of both countries will discuss memorandum of understanding (MoU) for co-operation.
Natwar Singh said both India and Pakistan also decided to run a 'Special Day' bus between Amritsar and Lahore, adding Khurshid Mahmud Kasuri had invited him to visit Pakistan, and he has accepted the invitation.
Kasuri said Pakistan's concerns regarding human rights situation in Indian occupied Kashmir were voiced during the talks. He also stressed the centrality of the Kashmir issue, which was cause of perpetuating tension and led to three wars and nearby war in 2002 between the two countries.
He said: "We are not unifocal, Pakistan is not interested in just discussing this issue. We know we can co-operate in other areas, it is a matter of common sense that in order to have a durable peace in South Asia, this (Kashmir dispute) will have to be resolved, hopefully sooner or later."
Both agreed to continue the cease-fire, negotiate conventional and nuclear confidence building measures (CBMs) and carry forward the composite dialogue process notwithstanding differences over Kashmir dispute, and Islamabad's concerns over human rights violations in Indian occupied Kashmir.
Natwar Singh also said Indian Prime Minister Manmohan Singh and Pakistan's President Pervez Musharraf will meet in New York on the margins of the UN General Assembly session during the current month and discuss all issues.
Accepting Kasuri's invitation to visit Pakistan, Natwar Singh announced that foreign secretaries of the two countries would be meeting again in December this year, and termed the outcome of the composite dialogue process as 'positive.'
Natwar Singh said both sides were sincerely committed to carrying forward the talks process, and the first round of the composite dialogue was concluded successfully, adding: "He should not loss sight of wise dictum. Diplomacy provides hope not salvation. Even modest progress is worthy of respect. We have made progress in last two days. Kasuri and I have established rapport and mutual trust."
He said India was committed to "deepen and widen its engagement with Pakistan to resolve all issues and build durable structure of peace and security in South Asia free from an atmosphere of terrorism and violence.
Natwar Singh said: "Cross-border infiltration remains a serious concern, and I have reiterated our concerns to Kasuri."
"There is no agreement on some issues which are old and complex, but the composite dialogue process will continue", said Singh, adding the two foreign ministers discussed the Jammu and Kashmir issue 'frankly and candidly to understand each others view' on it.
Emphasising that Kashmir dispute was central to relations between India and Pakistan, Kasuri said the matter is complex, but not intractable. Given the political will, it can be solved and should be solved, he added.
Stressing that Pakistan was 'not unifocal', Kasuri said: "It is not that Pakistan is interested in just discussing Kashmir issue. No. We know that we are living in modern age. There are areas where we can co-operate. Hopefully, there will be progress on all eight items."
The issues listed under the composite dialogue include Jammu and Kashmir, peace and security, including CBMs, terrorism and drug-trafficking, Siachen, Wullar/Tulbul barrage, Sir Creek, trade and economic co-operation and promotion of friendly exchanges.
Kasuri also said Islamabad was 'not imposing pre-conditions' on resolution of the Kashmir issue, and added that 'sky is the limit if two sides co-operate' with the desire for resolving it.
Pinpointing that Kashmir dispute was the cause of three wars and nearby war in 2002 between the two countries, Kasuri said this issue should be solved sooner or later to ensure durable and lasting peace in South Asia.