The Indian government has acknowledged that Pakistan is acting to stop Islamic rebels infiltrating its territory and announced it was immediately restoring the right of Pakistani aircraft to fly over India.
The move, which comes ahead of a visit to the region by the US Defence Secretary, Mr Donald Rumsfeld, marks the first sign the two nuclear-armed neighbours are starting to yield to intense diplomatic pressure to pull back from the brink of war.
"There are some indications of a diminution of infiltration, so we felt this response was warranted," the Indian foreign ministry spokeswoman Ms Nirupama Rao told a press conference, referring to the lifting of the overflight ban.
The disputed state of Kashmir, which is divided between India and Pakistan and claimed by both, is at the heart of tensions between them. Pakistan gave a guarded response to India's decision, but said it would consider a reciprocal move.
The overflight ban was imposed along with a series of diplomatic sanctions after a suicide attack on the Indian parliament in December which New Delhi blames on Pakistan-backed militants.
After the December attack on the Indian Parliament, India and Pakistan moved up to a million soldiers to their borders in a tense stand-off that intensified last month when militants struck at a military camp in Indian Kashmir, killing 32 people before they were themselves killed.
India, warning of a "decisive battle", called on Islamabad to demonstrate it was serious in its commitment to halt infiltrations of militants. The turning point came last week with a visit to the region by US Deputy Secretary of State Richard Armitage, who secured from Pakistani President Pervez Musharraf a commitment to take steps to "permanently" halt incursions.
Police in Kashmir confirmed there had been a reduction in infiltration by rebels but warned they would prefer to "wait and watch" before drawing conclusions.
Western diplomats saw the move as the start of a gradual process of de-escalation of tension. "India does not want to lower its guard immediately," one diplomatic source said, referring to when a troop demobilisation and the withdrawal from forward positions of warships and warplanes could be expected.
AFP