Pakistani Prime Minister Zafarullah Khan Jamali said he hoped the two countries could make progress on resolving the decades old dispute over the divided region of Kashmir -- a conflict that led the nations dangerously close to the brink of war in 2001.
"I am hopeful a good solid solution should be coming forward on all issues, of course including the Jammu and Kashmir issue," Jamali told reporters at a news conference in Islamabad.
The Indian state of Jammu-Kashmir, the only Indian state with a Muslim majority, comprises 45 percent of the disputed Kashmir region. Pakistan controls about 35 percent of the territory and China also holds a small portion of the land.
Pakistan's announcement comes in response to a speech by Indian Prime Minister Atal Behari Vajpayee's last week where he pledged to make new and decisive moves toward peace with Pakistan.
Vajpayee said he would restore full diplomatic ties with Pakistan, including the return of an Indian ambassador to Islamabad, and reopen travel links between the neighboring nations.
"How long will we keep fighting with Pakistan? We want to give Pakistan one more chance, not out of weakness but out of self-confidence," Vajpayee told India's parliament Friday.
India cut all air and rail links and withdrew its ambassador from Islamabad after an attack on the Indian parliament in December 2001 that was blamed on Pakistan-based militants. Pakistan denied any involvement in the incident.
Vajpayee made Friday's announcement after an initial telephone conversation with Jamali to discuss ways to improve ties between the rivals, the first high-level contact between the two capitals in more than a year.
Jamali said he favored a progressive approach to negotiations that could ultimately lead to a formal summit between the two countries and proposed taking steps to bring respective embassies up to full strength.
"We believe that all outstanding issues between Pakistan and India must be addressed sincerely and constructively and in a composite manner through a sustained dialogue with a sense of priority," Jamali said.
Besides restoring air, bus and train links, Jamali also said Pakistan wanted to increase trade between the two countries by reducing customs and tariffs on more than 70 items, although he did not specify which ones.
Jamali added that he wanted to restore sports links between the two nations, including the extremely popular field hockey and cricket matches.
Pakistan on Monday also offered to eliminate its nuclear weapons if India did the same, wire services reported. India has not responded to that proposal, but has denied similar requests.
India also did not immediately comment on Tuesday's developments, according to the Associated Press.
The new moves to improve the strained relations between the two countries come as U.S. Deputy Secretary of State Richard Armitage embarks on a diplomatic tour of the region.