"I pray to Allah (God) that everything between Pakistan and India gets better," taxi driver Sheikh Ikram said as he waited for passengers in Islamabad, the Pakistani capital where the breakthrough agreement was reached on the sidelines of a seven-nation summmit.

India and Pakistan Tuesday announced they would restart stalled bilateral talks from next month, following Monday's landmark meeting between Indian Prime Minister Atal Behari Vajpayee and Pakistan President Pervez Musharraf.

"Musharraf is taking good steps for peace with India and I wish him success," Ikram said.

On the lingering dispute of Kashmir, the cause of two of their three wars and over five decades of tensions, he was less optimistic.

"Only some miracle can solve it."

Afsar Jameel Bhutto, an executive at a private firm, said both countries had taken "a new direction towards peace".

"This time they (India and Pakistan) seem really determined to move things forward."

Sentiments were equally positive in India where some said it would open a new era for South Asia, while others saw it as a chance to visit Pakistan.

"I think South Asia, especially India and Pakistan, have finally realised the cost of non-cooperation as well as the benefits they could reap from a vibrant economic relationship," said Sanjeev Verma, a senior banker.

"But the fundamental differences will persist and so we will have to wait for more time to see the intentions of the parties involved."

For city college student Minal Gandhi, 19, the glitch-free summit meant something special.

"I hope travel restrictions are now removed so that I can travel to Karachi which is such a groovy place to shop for designer dresses," she added.

Zarina Jillani, a Pakistani human rights researcher said a majority of the people on both sides hungered for peace.

"This time there is lot of hope and euphoria for some major changes between India and Pakistan as a majority of people want talks," Jillani said.

Waseem Ahmed, manager at a law firm was sceptical of a breakthrough on Kashmir which has remained unresolved for over half-a-century.

"While all other problems can be resolved, the success of peace process is linked with Kashmir," Ahmed said.

"Let us wait and see what happens when Vajpayee returns to India."

WAR.WIRE