The leaders agreed that their foreign secretaries "will schedule meetings of the fifth round of the composite dialogue in the next three months," a joint statement said after the summit on the sidelines of the UN General Assembly.

The composite dialogue, which has made significant progress since it was launched in 2004, has been stalled for months due to political turmoil in Pakistan. The fourth round was completed last October.

The talks since January 2004 have added more bus and train links between the traditionally feuding neighbours, but there has been scant headway on Kashmir, the trigger for two of their three wars since 1947.

Singh and Zardari also decided to launch trading between the divided zones of the disputed Kashmir region from October 21.

In their first discussions since Zardari replaced former military strongman Pervez Musharraf in August, the two leaders also called for an ongoing ceasefire to be "stabilized."

Tensions have escalated along their border since last July when New Delhi accused "elements" in Pakistan of involvement in a suicide car-bomb attack on the Indian embassy in Kabul that left at least 41 people dead.

The leaders agreed that a special meeting of a joint anti-terror mechanism be held next month to address "mutual concerns," including the bombing of the embassy, the statement said.

Both acknowledged that "the peace process has been under strain in recent months," the statement said.

"They agreed that violence, hostility and terrorism have no place in the vision they share of the bilateral relationship, and must be visibly and verifiably prevented," it said.

Singh and Zardari appeared satisfied as they emerged from the meeting.

In brief remarks, Singh praised Zardari's vision for a progressive South Asia, saying they decided that issues be resolved through "peaceful" means.

Zardari called Singh the "architect of modern India," saying, "I hope to learn from him."

The meeting helped eased tensions, officials from both sides said.

"The leaders met for well over an hour, spent most of their time without aides and had a comprehensive discussion of the entire realm of issues in our relationship," Indian Foreign Secretary Shiv Shankar Menon told reporters.

"They shared a vision of how they want to take it forward, and at the end of it both expressed satisfaction at the quality and nature of the discussions they had," he said.

According to the statement, crossborder trade will commence on the road between Srinagar and Muzaffarabad, capitals respectively of Indian and Pakistani zones of Kashmir, as well as the road from Poonch, in southern Indian Kashmir, to Rawalakot in Pakistani Kashmir.

India and Pakistan already operate a passenger bus service between Srinagar and Muzaffarabad.

It was relaunched after a gap of almost six decades in April 2005 and is one of many measures undertaken by both sides to normalize ties since peace talks resumed more than four years ago.

Trade between India and Pakistan has been restricted for decades with most commerce done via Dubai and only a trickle of goods passing through the Wagah border crossing in Punjab.

India says Pakistan supports the Muslim insurgency in its region of Kashmir, helping rebels to cross under the cover of fire from Pakistani border guards -- a charge Islamabad denies.

The insurgency has left more than 43,000 people dead since it began in 1989.

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