Pakistan and India have reported progress in their wide-ranging peace talks that began early last year. However, officials of the two countries say they do not know yet what will be the shape of a final settlement of their long-running dispute over Kashmir, the cause of two of the three wars between India and Pakistan.

Senior diplomats from India and Pakistan concluded two-day talks in Islamabad Friday to review progress made on bilateral disputes, including the divided region of Kashmir.

The meeting between Pakistan's Foreign Secretary Riaz Mohammad Khan and his Indian counterpart, Shyam Saran, also was meant to set the stage for talks between Indian Prime Minister Manmohan Singh and Pakistani President Pervez Musharraf in New York later this month.

The two governments have announced a new set of measures to promote individual contact and cross-border trade, especially across the Line of Control that divides Kashmir.

Indian Foreign Secretary Saran told reporters at the end of the talks that such steps will lead to a better atmosphere for resolving more complicated issues, such as Kashmir.

"It is important to adopt a people-centric approach, try and reduce the negative consequences of these lines drawn on the map [disputed Kashmir border], encourage cross-border, cross-LOC [line of control] trade, encourage peoples-to-peoples contact," said Shyam Saran. "Because this is the manner in which you can create a virtual circle of greater understanding, and this will contribute to reaching the goal that we both wish to achieve."

Both Pakistan and India claim the divided Kashmir region in its entirety. India alleges Islamic militants often cross the cease-fire line in Kashmir to launch terrorist attacks in the Indian-controlled portion. Pakistan denies the charge, and maintains it has done all it can to prevent infiltration.

Mr. Saran says that infiltrations must stop, and security must improve before progress can be made on Kashmir.

"On the ground, infiltration and violence still continue, and it is our hope that this would subside," he said. "Terrorism is something, which must be confronted. It must not be allowed to impede the peace process."

Nuclear-armed Pakistan and India also announced at the end of the talks that a formal agreement would be signed in October on notifying each other about ballistic missile tests. The move is aimed at reducing the risk of a nuclear conflict. The next round of the peace talks will be held in January 2006.