"There is a recognition that this is an issue which needs to be tackled between the two countries. But it is a complicated issue it may take time to resolve," Indian Foreign Secretary Shyam Saran told a media briefing. Singh and Musharraf agreed to increase the frequency of the occupied Srinagar-Muzaffarabad bus service, which was re-launched on April 7 after a gap of almost 60 years.
The two leaders ran almost half an hour beyond a scheduled two-hour closed-door session after their delegations met, and emerged smiling for the cameras.
"The many issues which are with our two countries were discussed and the dispute over Jammu and Kashmir was also included and I want to say that I am very happy that discussions on all these issues were held in a very, very friendly atmosphere," Musharraf said.
Singh accepted an invitation from Musharraf to visit Pakistan sometime this year with dates to be announced later, India's foreign ministry said.
BAGLIHAR DAM: Saran said India was open to a new round of talks to try and resolve differences with Pakistan over the construction of Baglihar Dam.
He said Prime Minister Manmohan Singh had told President Musharraf that New Delhi wanted more discussions on the dam project to assure Islamabad that water supplies would not be cut.
"Prime Minister Singh sought to allay Islamabad's apprehensions on the issue and unequivocally stated India's commitment to abide by the parameters laid down by the 1960 treaty in letter and spirit," Saran told reporters.
"There is a readiness to engage in further technical discussions on this issue to try and resolve it. We are prepared to do that. The Pakistan President was thankful for the assurances," he added.
A joint statement on the progress of the talks is expected before Musharraf leaves for Manila on Monday morning after a possible meeting with Indian media editors and former prime minister Atal Behari Vajpayee.
"We want to promote trade and any problems that are coming in the way we certainly want to resolve them," PTI quoted Singh as saying during the talks.
Saran called for a joint trade commission which has not met since 1989 to be revived.
Bilateral trade between India and Pakistan has risen from 161 million dollars in 2000 to 483.85 million dollars in the fiscal year ended March 31, with the balance tilted heavily in India's favour.
Other issues discussed by the leaders included the launch of a train service between Munnabao in Rajasthan and Khokrapar in Sindh in December, the release of 156 Pakistani fishermen from Indian jails, and the jailing of people who strayed across the Line of Control.
Saran made it clear that the issue of an 'Islamic militancy' in occupied Kashmir was still bedevilling relations between the nuclear-armed rivals and could set back any progress.
India accuses Pakistan of fomenting an Islamic rebellion in occupied Kashmir, a charge Islamabad denies.
New Delhi, however, welcomed the fact that Musharraf had condemned an attack on a complex where passengers were being housed on the eve of the launch of the Kashmir bus service
Singh was shown on Indian television presenting Musharraf with three birth certificates, including his own, prepared by a New Delhi hospital where his mother had him and two of his siblings in the 1940s.
OTHER LEADERS: President Musharraf also held a meeting with his Indian counterpart A.P.J. Abdul Kalam at Rashtrapati Bhavan and discussed matters relating to bilateral relations between the two countries.
Foreign Minister Khurshid Mahmud Kasuri, Minister for Information and Broadcasting Sheikh Rashid, Commerce Minister Humayun Akhtar, Minister of State for Sports Mohammad Ali Durrani, Foreign Secretary Riaz Mohammad Khan and Pakistan's High Commissioner to India Aziz Ahmad Khan were present at the meeting.
From the Indian side Foreign Secretary Shyam Saran and other officials of the external affairs ministry attended.
Later, the Indian President hosted lunch in the honour of President Musharraf, also attended by the members of his entourage.
Furthermore, President of the ruling Congress Party, Sonia Gandhi and Leader of the Opposition, L.K. Advani separately called on President Musharraf on Sunday.
They discussed with the President Pakistan-India bilateral relations.
Khurshid Kasuri and Sheikh Rashid were also present during the meetings.
OUR SPECIAL CORRESPONDENT ADDS: President General Pervez Musharraf and Prime Minister Manmohan Singh believe that the positive trend of relations could be impacted activities of terrorist elements.
They acknowledged that both sides would not allow it to happen, said the Indian Foreign Secretary Shyam Saran.
He told reporters that both sides see a forward movement in relations but also recognise the difficulties that need to be overcome.
Indian Prime Minister reiterated to the Pakistani leader his vision relating to the future of South Asia in comparison with other regions and the economic prospects possible because of co-operation among the countries in this part of the world.
"We said that India and Pakistan being the two largest countries in Saarc can bring their creative energies together. Both have the talent and reserves to transform the economic prospects to make the region dynamic. We said all these were eminently possible and we would like to take the present process forward," Saran said.
It was stated that President Musharraf responded positively to the feelings and Indian PM's vision of synchronising energies and shared prosperity.
While discussing the issue of Jammu & Kashmir, Manmohan Singh pointed out that redrawing boundaries was not possible, Saran said. However, over time with both sides giving each other greater facilities for trade and transportation across the border and across the Line of Control (in Kashmir) would lead to contacts and mutual trust, making it possible to address complex problems in future.
The Indian Secretary said President Musharraf agreed that the confidence building measures (CBMs) have made a lot of progress, however, without fixing any deadline we need to address all outstanding business between the two countries.
KHOKRAPAR-MUNNABAO RAIL LINK: Premier Singh told the Pakistani side that India was prepared to open the Khokrapar-Munnabao rail link by October 2, 2005. The Pakistani side said they would complete their side of the rail track by December this year, said the Indian Foreign Secretary.
Both sides agreed to revive the Joint Commission set up in 1989 and meet at an early date to discuss the economic and trade issues. It was said that there was agreement that the Joint Study Group established at the commerce secretaries level could be the mechanism to discuss promotion of trade, overcome obstacles and apprehensions of Pakistani businessmen about Indian tariffs.
The Indian side agreed that they would withdraw any such barriers on trade.
Both sides, it was said, discussed to build the infrastructure making transport exchange possible for more trade directly between them instead of through any third country. The approach of both sides was very positive, said the Indian diplomat.
India, he said, informed the Pakistani side about releasing of 156 Pakistani fishermen on April 19th and 136 other civilians once their papers from Pakistan were received.
Further, he said, there was agreement that in cases where innocent people stay over limit in each other territories, both sides must hand them over.
The Indian side emphasised that trade and transport across each other to Central Asia and the Gulf would be mutual benefit and there was agreement to push the pipeline project forward from both Iran and Turkmenistan.
In the end both sides showed readiness to take the dialogue forward and remain engaged for developing economic relations.