Prime Minister Manmohan Singh said India and Pakistan have agreed to set up consulates in Mumbai and Karachi before the end of this year.
Dr Singh was accompanied by Pakistan President General Pervez Musharraf in reading out the joint statement at Hyderabad House in New Delhi on Monday.
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Setting up of the consulates was among the many small but significant measures announced at the end of Musharraf's three-day visit to India.
India and Pakistan resolved to work together and carry forward the peace process. Dr Singh said that both leaders agreed that the peace process was "irreversible".
Singh said both sides agreed to continue discussions on Jammu and Kashmir in a "sincere and purposeful manner" to find a final settlement of the issue.
The statement said the Khokrapar-Munabao Rail link will be established by January 1, 2006.
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Singh and Musharraf used the opportunity to review the progress since the statements on January 6, 2004 in Islamabad and September 24, 2004 in New York.
They assessed positively the progress in Confidence-Building Measures and people-to-people contact and enhanced areas of integration.
The leaders condemned the terrorist attack to disrupt the Srinagar-Muzafarbad bus service and welcomed its successful launch.
The statement said both the leaders were determined not to allow terrorism to impede the peace process.
The Prime Minister said he had accepted in principle the invitation extended by Musharraf to visit Pakistan and mutually agreed dates would be worked out.
The joint statement also said that bus service to various religious places like Nankana Sahib in Pakistan would be launched soon.
General Musharraf said the visit had surpassed his expectations.
Indian and Pakistan diplomats were engaged in sorting out differences in the joint statement through Sunday night.
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