Pakistan has revived expectations that it will grant the most-favoured nation status to India. The move will help New Delhi push goods into its neighbour's market and improve ties.
A senior government official said the issue had come up during the foreign secretary-level talks earlier this week and Pakistan expressed its willingness to re-engage in the discussion.
While there is little progress beyond a statement of intent at present, the external affairs ministry is going to take up the issue with the commerce department, which is the nodal body for cross-border trade.
If the department is willing to proceed, bilateral discussions between the commerce secretaries of the two nations will be initiated to finalise the matter.
Foreign secretary Nirupama Rao also used the opportunity to raise the issue of Pakistan replacing its positive list for trade with a negative list.
Unlike other Saarc countries, including India, which have a small negative list for goods in which trade is restricted due to local sensitivities, Pakistan has a positive list of 1,900 items which it allows to be imported from India.
For several years, Islamabad has not granted India the MFN status despite several rounds of discussions.
It also refuses to put in place a system of negative list.
In private, Pakistan officials cite domestic political sensitivity for not doing anything on the two issues.
"There is a lot of potential for trade and it will be good for both sides," said an official, who did not wish to be identified.
He, however, said that during the foreign secretary level talks Rao had raised the issue of confidence building measures and said it was important to strengthen bilateral relations across the spectrum.
The official also said India and Pakistan had agreed to sort out some technical issues to improve the people-to-people relations for those living on the two sides of the line-of-control.
While at the official level, trade between the two countries is rather insignificant, a large part of goods to and from Pakistan are routed through other countries such as the United Arab Emirates.
In case the two sides agree to a small negative list, bilateral trade numbers could increase significantly.
