The thaw in relations between India and Pakistan over the past year has made it possible for them to explore ways to build stronger economic ties.

Top Indian and Pakistani commerce officials recently discussed the issue during a meeting in New Delhi. Trade officials from both countries say they are looking at ways to dismantle non-tariff barriers and boost cooperation between their customs departments.

Pakistani Commerce Secretary Tanseem Noorani said the first step is to identify the obstacles that businessmen face. "We thought for any meaningful trade relations between India and Pakistan, it has to be based on a win-win situation. So therefore a study group has been formed by the two governments to identify areas where the problems perhaps exist," he said.

India's Commerce Minister Kamal Nath said greater economic cooperation will help ease poverty and unemployment in both countries. "The best route in this is, how can this joint study group create greater economic activity in both Pakistan, create greater economic activity in India so that it creates employment in both our countries," he said.

Direct trade between the two countries is worth a paltry $300 million, and amounts to less than one percent of their total transactions with the rest of the world. But indirect trade is estimated at more than $1 billion.

For example, Pakistan buys many Indian goods such as tea and sugar from third countries such as Dubai because they are banned from being traded directly. Officials say the first step will be to remove such barriers.

Financial analysts say there is vast potential for trade between the two countries. Business ties have shown signs of improvement under a rapprochement process that began a year ago.

Bilateral trade in the first half of the fiscal year ending on March 31 grew by more than 200 percent compared with the same period in the previous year.