Sixty-five years after the sub-continent was partioned in 1947, the year 2012 saw New Delhi and Islamabad taking some concrete steps to improve trade and ease travel between them. President Asif Ali Zardari visited India, but Prime Minister Manmohan Singh made it clear that he would only visit Pakistan once there was progress in bringing to book those responsible for the 26/11 Mumbai terror attack.
The year began with India and Pakistan inking three deals and agreeing to liberalise visa regimes and move from a "positive list" to a short "negative list" trade regime, a major step forward to ease trade norms and facilitate movements of people.
Indian Commerce and Industry Minister Anand Sharma, who led the largest business delegation to Pakistan in February, said the two countries have taken a major step forward to boost trade. His Pakistani counterpart Amin Fahim reciprocated with a tour to India in April.
During Sharma's visit, a customs cooperation agreement was signed to help avoid arbitrary stoppage of goods at each other's ports.
A bilateral cooperation agreement on mutual recognition between the Pakistan Standard and Quality Control Authority (PSQCA) and the Bureau of Indian Standards (BIS) and agreement on redressal of trade grievances between Pakistan and India were also signed.
As the year drew to a close, the ties were cemented with the new visa regime being operationalised during the visit by Pakistan's Interior Minister Rehman Malik.
The two countries operationalised the visa agreement but made little headway on key issues including action against Lashkar-e-Taiba (LeT) founder and Mumbai terror attack mastermind Hafiz Saeed. India continued to exert pressure on Pakistan to act against Hafiz Saeed.
Malik insisted that Pakistan was in no way involved with the 2008 Mumbai attacks and stoked fresh controversy by alleging that Indian non-state actors were also involved in the conspiracy. He said 26/11 accused Abu Jundal "worked as a source for (an) elite agency of India" and could have turned into a double agent.
During his three-day visit in December, Malik also struck a discordant note with his purported comparison of the Babri mosque demolition with the Mumbai attack.
The year saw President Asif Ali Zardari visiting India. Accompanied by son Bilawal, Zardari also offered prayers at the revered shrine of Sufi saint Khwaja Moinuddin Chisti in Ajmer in April, and also announced a donation of $1 million.
But Pakistan's hopes of hosting Manmohan Singh this year did not materialise.
Manmohan Singh, who was born in the village of Gah that is now part of Pakistan's Punjab, is seen as the prime mover behind the initiative to craft a new relationship with Pakistan.
But Manmohan Singh did not visit Pakistan this year - as was hoped for by Islamabad - and in fact told Rehman Malik that his visit to the country was dependent on the progress in bringing to book those responsible for the 26/11 Mumbai terror attack.
During his meeting with Zardari on the sidelines of the NAM summit in Tehran Aug 30, Manmohan Singh had conveyed that expeditiously concluding the trial of the 26/11 perpetrators would be the biggest confidence building measure.
November saw the hanging of Ajmal Amir Kasab, the lone surviving Pakistani terrorist involved in the Mumbai attack. Kasab and nine other Pakistani gunmen had launched the bloody attack on multiple locations in Mumbai Nov 26-29, 2008, killing 166 people.
A high point in the relations between the two countries came with the visit of S.M. Krishna, the then Indian external affairs minister, to Islamabad in September.
He met his Pakistani counterpart Hina Rabbani Khar, and both the leaders promised to find mutually acceptable solutions to all outstanding issues.
Despite the thaw in relations, there were pinpricks.
Migrants from India's northeastern states suffered a nationwide panic attack in August, which was blamed on Pakistani elements spreading misinformation through the social media.
This prompted Indian Home Minister Sushilkumar Shinde to telephone Rehman Malik and ask for full cooperation in "checking such elements".