Pakistan is expected to come up with the contours of the liberalized regime and India will match it, said a senior government official.

In addition, the Indian government has agreed to consider lifting the blanket ban on investment from across the border, while it has asked Islamabad to move to "normal trade".

During official-level talks last week, sources said there were indications that Pakistan would grant most-favoured nation status to India and also implement its commitments under the South Asian Free Trade Agreement that entails lowering of duties and allowing import of commodities, barring a small negative list.

At present, Pakistan follows a system of positive list which means only a handful of products can be imported from India. As a result, a bulk of products is traded through third countries such as the United Arab Emirates.

Sources said India has said that there was no point of Pakistan signing Safta if the terms of the agreement were not implemented. Recent talks, at the level of commerce secretary and at official level, have resulted in positive atmosphere being created and this will be followed by talks at the level of trade ministers from the two countries. By mid-October, Pakistan is expected to ease trade curbs and also come up with easier visa rules.

In case of investment, officials said there was no specific interest from a company in India or Pakistan but the two sides were of the view that there was need to remove the blanket ban.

The industry department, which deals with foreign direct investment, has been asked to look into the policy and see if investment from Pakistan can come through after proper vetting. In case of security concerns the same could be factored in.

With security agencies opposing investment by even large multinationals with presence in Pakistan, it is unlikely that they will soften their position even after the legal requirements are lowered. But the move is expected to improve overall sentiment.

"We are some distance away from investment actually coming through given that even companies would be worried about reversal of policy. But in case of trade, Pakistan can show the way and we can reciprocate through easier visa norms," said an analyst.