India and Pakistan on Sunday agreed to open the rail link between Munnabao in Rajasthan and Khokrapar in Sindh in December.
The decision was taken during the talks between President Pervez Musharraf and Prime Minister Manmohan Singh that went on for two hours.
The two sides also decided to increase the frequency of the Srinagar-Muzaffarabad bus services, official sources said.
Musharraf and Dr Singh discussed all issues between the two countries during a delegation-level talks that lasted for over an hour, which were followed by a restricted-level meeting, in which the two leaders were joined by their foreign ministers.
After the 45-minute restricted-level talks, Musharraf and Singh held a one-on-one meeting.
The talks were wide-ranging and held in a 'very warm atmosphere', media advisor to the PM Sanjaya Baru said.
Before the talks, both Musharraf and Singh watched for over an hour the last one-day match of the ongoing cricket series between the two countries at the Ferozeshah Kotla grounds.
"The two leaders watched the very exciting start to the cricket match. They applauded the performance of both sides," external affairs ministry spokesperson Navtej Sarna said.
Dr Singh and Musharraf will later go to the Rashtrapati Bhavan, where President A P J Abdul Kalam will host a lunch.
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