Officials of the Countries Are Positive After Meetings, but New Claim of Islamabad Ties to Mumbai Attack Shows Hurdles.

NEW DELHI—The foreign ministers of India and Pakistan struck a positive note Thursday after peace talks in Islamabad, but India's new claim that Pakistan's spy agency orchestrated the 2008 terrorist attack on Mumbai underscores that distrust remains between the nuclear-armed rivals.

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Indian External Affairs Minister S.M. Krishna said his Pakistani counterpart, Shah Mehmood Qureshi, assured him that Pakistan will try to speed up the prosecution of terrorists on its soil and will use investigative leads provided by India to "unravel the full conspiracy" of the Mumbai attack, in which 10 gunmen killed more than 160 people.

Mr. Qureshi said the countries also discussed the divided Himalayan region of Kashmir, which has seen a rise in violence recently, as well as their long-standing dispute over Sir Creek, a 96-kilometer strip of water on their borders that opens up into the Arabian Sea.

He said the countries also explored confidence-building measures, such as increasing cross-border trade and exchanging fishermen detained after straying into each other's waters. "Pakistan has always wanted friendly, cooperative and good neighborly relations with India. We've started a process to achieve this objective," Mr. Qureshi said in a joint news conference of the two ministers.

India says terrorism is the core issue of the talks, while Pakistan wants to focus on other issues, including disputes over shared water resources and over Kashmir, which is two-thirds controlled by India but claimed in entirety by both countries. India and Pakistan have fought two of their three wars over Kashmir.

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Pakistani Foreign Minister Shah Mehmood Qureshi, center right, and Indian External Affairs Minister S.M. Krishna arrive for talks at the Foreign Ministry in Islamabad on Thursday.

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Despite the moves to ease tensions, the new spat that played out ahead of the meeting could complicate the nascent rapprochement between the neighbors. India is now accusing elements of the Pakistani government of planning and executing the Mumbai attack. India had previously blamed Pakistan-based militants for carrying out the attack, but hadn't publicly accused Pakistan's government of direct involvement.

This week, Indian Home Secretary G.K. Pillai told the Indian Express newspaper that Pakistan's spy agency, the Inter-Services Intelligence was "literally controlling and coordinating [the attack] from the beginning till the end."

A home ministry official said Thursday that information about the ISI's involvement came from India's interrogation of David Headley, a Pakistani-American in U.S. custody who pled guilty in March in a Chicago federal court to doing reconnaissance on Mumbai targets before the siege of India's financial capital in November 2008.

Pakistani officials have vehemently denied that its intelligence agency played any role in the Mumbai attack. Pakistani Information Minister Qamar Zaman Kaira said Mr. Pillai's comments were "baseless propaganda," according to the Press Trust of India news service. "When two foreign ministers are meeting, such allegations should not be made."

The row was a significant diplomatic setback after both countries had tried to strike a tone of reconciliation in recent months. In February, their foreign secretaries met to lay the groundwork for a peace push, and since then the prime ministers and home ministers of India and Pakistan have met on the sidelines of regional summits to advance the talks.

Mr. Krishna said he raised with Mr. Qureshi the new information India has gleaned from Mr. Headley, but he didn't specifically mention the ISI controversy.

In addition to the ISI dispute, there are other hurdles to peace. India has said Pakistan isn't moving fast enough to prosecute militants based there, including those tied to the group Lashkar-e-Taiba. Pakistani authorities have arrested five Pakistanis and have warrants out on two others for their roles in the Mumbai attack. But the trials of the five men have yet to begin, according to Pakistani government officials. Mr. Qureshi said the two foreign ministers discussed how to "hasten the trial process."

In Kashmir, violent demonstrations by separatists have erupted in recent weeks in the portion of the region India administers. At least 15 Kashmiri protesters have died in fighting with Indian security forces since mid-June. India deployed its army to quell the protests, but it is still largely relying on police. Some Indian officials have said Pakistan-based militants are fueling the separatist unrest in Kashmir. Pakistan denies that and has said it is concerned about human-rights abuses by Indian forces.

Pakistan's ISI has faced accusations for years of interfering in regional security and having links to terrorist outfits. India blamed the spy agency for the suicide car-bombing of the Indian embassy in Kabul in 2008, while the same year, Afghan officials said the ISI plotted a failed assassination attempt on President Hamid Karzai at a parade. Pakistan has denied those allegations.

The ISI helped fund and train Lashkar-e-Taiba in the 1990s as a militia force to fight Indian troops in Kashmir. The group was banned in 2002 by then-president Pervez Musharraf, but militants from the organization continued to operate under an Islamic charity, according to the United Nations. The ISI says it is no longer involved with the group.