Meeting on the sidelines of the 17th South Asian Association for Regional Cooperation (SAARC) summit here, the two leaders held delegation-level talks for around half an hour in a seaside beach cottage at the idyllic Shangri La resort hotel and followed it up with nearly 45 minutes of one-on-one talks.
With relations having languished since the cataclysmic 26/11 terror attacks nearly three years ago, the two sided agreed to push a host of initiatives, including the revival of the joint commission, a preferential trade agreement and liberal visa regime.
India conveyed to Pakistan the imperative need to punish perpetrators of 26/11 carnage and underlined that terror should not be allowed to spoil improving relations between them.
Pakistan promised to conclude the trial of the Mumbai terror accused in its custody and declared that Ajmal Kasab, the lone surviving 26/11 terrorist, should be hanged.
In a sign of the new spirit of mutual accommodation, Prime Minister Manmohan Singh and his Pakistani counterpart Yousaf Raza Gilani agreed to open a new chapter in ties and hoped the next round of talks will be "more productive and constructive."
Coming out after their meeting, the two smiled and made brief statements before the media in which they virtually echoed each other in their desire to start a new phase in relations.
Describing Gilani as "man of peace," Manmohan Singh said that the dialogue process, which the two countries resumed early this year, have yielded positive results, but stressed that "more needs to be done.
"We have decided that we will resume this dialogue with the expectation that all issues which have bedeviled the relations between our two countries will be discussed with all the sincerity that our two countries can bring to bear on these talks," said Manmohan Singh.
Saying that "the destinies of people of India and Pakistan are very closely linked," the prime minister stressed that "we have wasted lot of time in the past in acrimonious debates.
"The time has come to write a new chapter in the history of our relationship." Saying that Gilani fully endorsed this view, he said that "the next round of talks should be far more productive, far more result-oriented in bringing the two countries closer to each other than ever before."
Gilani, too, struck an upbeat note. "We had a good meeting". He said the next round of the talks would be "more constructive, more positive, and will open a new chapter in the history of both the countries."
"We have very openly discussed all issues including all core issues. We have discussed, the Prime Minister and we have been very open," he said while alluding to discussions on water, terror, Sir creek, Siachen glacier and Kashmir.
Saying that the two sides are "moving in a positive direction," Gilani also assured that "all possible steps were being taken in the context of the joint fight against terror."
Briefing reporters after the talks, Foreign Secretary Ranjan Mathai said that the prime minister conveyed that the period of "accusations and counter-accusations was behind us," and stressed on key initiatives that emerged from the talks that included the revival of the joint commission and the signing of a visa agreement.
Building on positive momentum generated by Pakistan granting India Most Favoured Nation status, Mathai said the two countries are now planning to move towards a preferential trade agreement.
The two sides also decided to fast-track implementation of cross-border trade and confidence-building measures that were finalized in July. Commerce secretaries will meet Nov 14 in New Delhi. This will be followed by talks between home secretaries in December that will focus on terror and security-related issues. There is a plan to arrange a meeting between water secretaries as well to sort out shared river water disputes.
Manmohan Singh told Gilani that "it is imperative to bring the perpetrators of 26/11 attacks to justice", said Mathai. The Pakistani side promised to bring the trial of the seven 26/11 terrorists who are in Pakistani custody to conclusion and pointed that the judicial commission, that will be visiting India soon, will positively impact the judicial process of bringing 26/11 perpetrators to justice.
In a surprisingly blunt assertion, Pakistan's Interior Minister Rehman Malik declared that Ajmal Kasab is a non-state actor, a convicted terrorist and should be sent to the gallows. "Kasab is a terrorist, a non-state actor who should go to gallows and his accomplices too," said Malik.
Key highlights and outcomes of the first formal talks between the two leaders since India and Pakistan resumed their peace process early this year:
* India pressed for bringing perpetrators of 26/11 attacks to justice. Pakistan assured to conclude trial of 26/11 accused soon.