India and Pakistan have agreed to resume formal peace talks that were broken off by New Delhi after the 2008 Mumbai attacks, Indian sources said today, a move that should help ease tensions in the volatile region.
The nuclear-armed neighbours have been under pressure from the United States to reduce tension because their rivalry spills over into Afghanistan, complicating peace efforts there.
The decision was made at a meeting between the two countries' top diplomats in Bhutan's capital, Thimphu, on the margins of a regional conference.
New Delhi suspended a 2004 peace process between the two sides after the commando-style militant attacks in India's commercial capital, blaming Pakistan-based militants for the deaths of 166 people.
Since then officials from the two nations have met to improve ties but have shied away from resuming talks - called the composite dialogue - that included resolving their differences over issues including the main territorial dispute over Kashmir.
"The new talks are in effect the formal resumption of the composite dialogue," said a senior Indian government official involved in repairing ties with Pakistan.
"What happened in Thimphu is that we both agreed ... there is support for the (peace) process (on both sides)," the official said, adding the new round of talks would not be called "composite dialogue".
When asked whether formal talks were being started, another Indian official replied: "Yes, it's another attempt," though he stressed that progress would be "incremental".
A Pakistani government official wouldn't confirm the decision, but said there had been progress.
Indian government sources said it had been agreed that talks would resume at several levels, including between the home secretaries of the two countries "in the coming months", leading up to talks between their foreign ministers later this year.
Financial markets tend not to react to such diplomatic twists and turns, but a second attack like Mumbai could trigger a retaliation by India, a move that would almost certainly hit investor confidence in Asia's third-largest economy.
Indian prime minister Manmohan Singh has made efforts to entice Pakistan to peace talks, concerned about the legacy of his second term government. But such moves have little impact on voters at home who are more concerned about inflation and corruption.
In the past tentative discussions between India and Pakistan have floundered . India has consistently demanded that Pakistan act against militant groups on its soil.
Islamabad, which is fighting an Islamist insurgency of its own, says it is doing all it can and and demands New Delhi provide evidence to back its accusations.
"Ever since the Mumbai attacks we have had near-promises of resumption of dialogue but nothing has happened," said Amitabh Matoo, professor of International Relations at Jawaharlal Nehru University.
"Now at last there is a sense of realism in Islamabad and Delhi on the criticality of engagement. I am cautiously optimistic about the talks. Cautious because there are so many variables and unknowns involved."
Along with Kashmir, the foes have engaged in a proxy battle for influence in Afghanistan, complicating Western efforts to end the 10-year war there.
Pakistan considers Afghanistan a part of its sphere of influence and claims a role in any effort to seek a settlement with the Taliban.
India, which supported the anti-Taliban Northern Alliance during the civil war, fears a return of the Taliban would embolden militant groups acting against it.
Reuters