But neither side budged from its stated position on Kashmir and terrorism. This, combined with the recent spat between New Delhi and Islamabad over Pakistan's troubled province of Balochistan, indicates that the peace process had hit a slow, rough patch.
While Islamabad complains that India remains intransigent over Kashmir, New Delhi asserts that Pakistan has been less than sincere about stemming cross-border terror.
The lack of progress on these two issues has dogged the talks ever since then Prime Minister Atal Bihari Vajpayee and Pakistan President General Pervez Musharraf broke the ice at the SAARC summit in Islamabad in January 2004.
Despite the slew of CBMs that have been brokered between the two nations since then, the leadership on both sides admit that the essential 'trust deficit' remains to be bridged.
Musharraf has repeatedly expressed his exasperation over India's rejection of his so-called 'out of the box' solutions to the Kashmir issue. Among others, these include calls for the re-division of Kashmir on religious, ethnic and geographical lines and, more recently, the withdrawal of the Indian army from three specific regions of the state.
'Kashmir issue needs substantive resolution'
His suggestion that the Kashmiri leadership be made a party to the talks, however, has been taken up by India, although the two sides differ radically on who really represents Kashmir.
While asserting that no redrawing of borders is possible, India believes that stepping up trade, travel and business between the two neighbours would eventually reap a peace dividend, gradually eroding the deep distrust that prevails at the moment.
But Pakistan continues to assert that there can be no enduring peace until and unless Kashmir is resolved first, and has linked various CBMs, like granting MFN status to India, to it. The refusal to grant MFN status to India would stall the South Asian Free Trade Agreement which was supposed to come into force from January 1. But the recent recommendation by Pakistan's Ministry of Industries, Production and Special Initiatives to grant the status to India seems to indicate that economic priorities might finally outweigh political ones.
Delhi, in turn, links the recent attacks in Delhi and Bangalore to terrorists with Pakistani links, and says Kashmir can only be discussed as one of the many issues bedeviling bilateral relations.
India talks tough on cross-border terrorism
Pledging to take the peace process forward, a joint statement released at the end of the talks last week said 'the talks were held in a cordial atmosphere and were constructive.'
But reiterating the old position, Foreign Secretary Shayam Saran told journalists after the talks that 'our ability to take forward this positive dialogue is related to creating an atmosphere free from violence. Despite assurances by Pakistan, there is no end to cross-border terror.'
Similarly, on January 21, two days after the talks in New Delhi, Pakistan Foreign Minister Khurshid Mehmud Kasuri told visiting US Under Secretary of State for Political Affairs Nicholas Burns that 'Pakistan wants durable peace with India and this is only possible through resolution of the Kashmir issue to the satisfaction of the two countries, especially the Kashmiri people.'
Kashmir and terrorism. Add to this mix New Delhi's recently expressed 'concern' -- days before the foreign secretary talks began -- over the developments in Balochistan, where General Musharraf's regime has initiated a massive military crackdown to quell a local uprising.
Pakistan slams India for Balochistan comments
Some analysts see this as a calculated attempt by New Delhi to send the message out to Islamabad that if Pakistan continued to harp on Kashmir, India could now do the same about Balochistan.
The Indian statement provoked Gen Musharraf to revive the old claim that India was actively involved in the unrest in Balochistan, and warn India against interfering in Pakistan's internal affairs.
But "if Pakistan can raise Kashmir at nearly every international fora, why can't we express our concern over developments in Balochistan?" a senior Indian official asked.
Pakistan, however, dismisses this argument as disingenuous, saying that Kashmir has always been a disputed territory, whereas Balochistan was not.
One school of thought, however, links the reiteration of hardbound positions and the attempts at one-upmanship by the two countries to US President George W Bush's proposed visit to the subcontinent in March.
According to this view, both sides are actually lobbying Washington to back or endorse their position, which resembles the chicken and egg question: India believes cross-border terror must stop before real talks can be held on Kashmir, while Pakistan asserts that terrorism can only stop after the issue is resolved.
But instead of taking sides on this particular issue, chances are that Washington too will continue with its policy of lauding the talks, and treating Pakistan as a front-line ally against terror while building up its avowed strategic partnership with India.
This does not mean that no progress has taken place in bilateral relations.
Peace talks: complete coverage
If nothing else, the border ceasefire declared on November 26, 2003, has still held, however shakily, bringing respite to the thousands of villagers who faced the shells on an almost daily basis before that. (The mortar firing across the Pakistan border in early 2004 was ascribed to a militant outfit by a much embarrassed Islamabad.)
The truce between the two armies which had geared up for an imminent clash after the attack on the Indian Parliament, has held so far, though neither side has fully dropped its guard.
More than that, India's stress on cross-border linkages seems to have paid some dividends, however symbolic they may be.
The exchange of people from various walks of life between the two nations, and between the two Kashmirs, would have been unthinkable even three years ago. Contacts, including hotlines, have been established between various military and paramilitary outfits on both sides, as well as between the foreign secretaries; bus and rail services are expanding apace; and bilateral trade is expected to double to almost $ 1 billion this year.
A number of other confidence building measures -- some of them retrieved from the Lahore and Agra sessions -- have been put into play, while others are still being discussed.
But as the time nears for compromises on the basic positions held by each side, Islamabad and New Delhi are digging in, hoping to negotiate from a position of strength.
More from rediff