The Pakistani Cabinet has approved a proposal granting India "Most Favored Nation" trade status, a move seen as a major breakthrough as the longtime rivals work to normalize relations.
Pakistani Information Minister Firdous Ashiq Awan told a news conference in Islamabad Wednesday that the decision was unanimous and taken in the national interest, with all stakeholders, including Pakistan's military, in agreement.
The Most Favored Nation (MFN) designation removes tariffs, allowing countries to trade on equal terms.
Pakistan has already granted MFN status to 100 countries.
While India granted Pakistan MFN status in 1996, Pakistan has hesitated. Critics in Pakistan have cited the long-standing dispute over the Himalayan region of Kashmir. Other have expressed concerns about cheaper Indian goods flooding the Pakistani market.
In New Delhi, Indian Commerce and Industry Minister Anand Sharma told reporters that India deeply appreciates Pakistan's "positive gesture." He said the mutually beneficial decision will elevate bilateral economic engagement and help improve relations.
In September, the two countries' trade ministers pledged to more than double the value of bilateral trade to $6 billion within three years.
The talks between the top Pakistani and Indian trade officials were the first in New Delhi in 35 years.
Trade flows between the neighbors have remained relatively small due to a legacy of mistrust. Pakistan and India have gone to war three times since their independence from Britain in 1947.
India has also been hit by terrorist attacks carried out by militants trained in Pakistan.
Some information for this report was provided by AP, AFP and Reuters.