India and Pakistan agreed on Monday to start trading in the disputed Himalayan region of Kashmir, RIA Novosti reported, referring to the IBN news channel.
The decision was taken after talks involving senior officials and chaired by the deputy foreign ministers of the two countries.
An agreement is now expected to be signed during a meeting between India's Prime Minister Manmohan Singh and Pakistan's newly-elected president, Asif Ali Zardari, in New York later this week. The meeting will be held on the sidelines of the current UN General Assembly session.
IBN said trade will begin at the Srinagar-Muzaffarabad and Poonch-Rawlakot checkpoints. It also said that the lists of items subject for trade on both sides had been exchanged.
India and Pakistan have fought two wars over the mountainous region since partition by the British in 1947. Both sides control part of the territory, which has two capitals and hundreds of thousands of troops stationed on either side of the tense border.
India has accused Pakistan on several occasions of sponsoring terrorist groups, an allegation Pakistan has always denied.
The trade talks came as Pakistan and Indian troops engaged in a gun battle across the region's de facto border. A Pakistani woman was injured, according to security officials.