"We encourage direct dialogue as the best way for India and Pakistan to resolve any issues between them. Any step that contribute to a reduction in tensions between countries is positive," said national security spokesman Sean McCormack.

Pakistani President Pervez Musharraf and Indian Prime Minister Atal Behari Vajpayee met on the sidelines of a South Asian summit in Islamabad.

The meeting, at a summit of the South Asian Association for Regional Cooperation (SAARC), raised hopes for an end to 56 years of acrimonious relations between the neighbors.

Officials said Vajpayee and Musharraf tried to find common ground to start a dialogue on disputed Kashmir, which has caused two of their three wars and nearly triggered a confrontation between the two in 2002.

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