"The Cabinet has only given its approval in principle to move forward on the issue (of MFN) and permitted the Ministry of Commerce, which is actively engaged in trade talks with New Delhi, to negotiate with it trade-related issues," Gilani told reporters at his home in Lahore last night.
"We will give it the go-ahead if the situation is quite favourable and in the national interest. Otherwise, proceedings on it would be withheld," the Premier was quoted as saying by the media.
Gilani's remarks came against the background of a flip-flop by the Pakistan government on the issue of whether India had been granted MFN status.
Information Minister Firdous Awan had announced on Wednesday that the Cabinet had "unanimously approved" a proposal to give India the MFN status.
The Foreign Office subsequently clarified the Cabinet had only taken an in-principle decision on the issue and both countries would have to work towards the goal in further engagements.
According to one media report, Gilani said during his interaction with the reporters that the MFN issue does not involve the army.
The Premier was quoted by The Express Tribune as saying that only the business communities and stock exchanges of Pakistan and India are "legitimate stakeholders" in the issue and both were "on board" along with the parties in the ruling coalition.
However, during her news conference on Wednesday, Information Minister Awan had said that all stakeholders, including the military and defence institutions, were "on board" on the MFN issue.
The issue of normalising trade ties also figured in Foreign Minister Hina Rabbani Khar's consultations yesterday with top military officials, including ISI chief Lt Gen Ahmed Shuja Pasha.
Gilani said the Commerce Ministry would have to make important decisions independently in bargaining with India over trade policy and hence it had sought the Cabinet's go-ahead.
He contended the Cabinet did not have to refer decisions made on the MFN issue to Parliament.
"We can brief Parliament over the Cabinet's decision of going ahead with MFN, but according to my point of view it is not necessary. Only Cabinet approval is necessary to negotiate with other countries," he said.
Parliament would be briefed at an "appropriate time", he added.
Gilani said liberalisation of trade with India would benefit Pakistan's economy.
"It does not mean that we have given up our stand on other issues, including Kashmir. Look at the rising trade volume between China and India despite their border disputes," he noted.
Gilani said he had persuaded his Indian counterpart Manmohan Singh to resume the composite dialogue on all issues, including Kashmir, after the peace process was stalled in the wake of the 2008 Mumbai attacks.
"I told Dr Manmohan at our meetings in Sharm el-Sheikh, Thimphu and Mohali that terrorists were common enemies of both countries and we should not let one incident hold the whole peace process as hostage," he said.
Gilani said all partners in the PPP-led coalition did not have "any objection or concern" over strengthening trade ties with India.
He claimed that the parties opposing such moves also now "wanted the same or even a step farther".