In his meeting with the visiting Pakistan President Asif Ali Zardari, Prime Minister Manmohan Singh brought upfront the issue of Islamabad acting strongly against LeT founder Hafiz Mohammad Saeed, mastermind of the 26/11 Mumbai attack, on whom the US announced a $10 million bounty.
The meeting between the two, just before a lavish lunch laid out for the Pakistani delegation that included Zardari's son Bilawal, was also used to spruce up bilateral ties and push forward dialogue between the two countries on contentious issues.
"The leaders discussed the problem of terrorism which is a major issue by which the Indian people will judge progress in bilateral relationship," India's foreign secretary Ranjan Mathai told reporters.
This was also linked in the background to the PM accepting Zardari's offer to visit Pakistan.
Mathai said the timing of the visit would be worked out only after "substantive preparation" and "mutual convenience", indicating that India and Pakistan needed to work further to show tangible breakthroughs in their ties.
On his part, Zardari said that the matter of Saeed and the 26/11 attack needed to be discussed "at length" between the two governments.
He also stated that there were legal processes in Pakistan without going through which his government could not move against those suspected to behind the Mumbai attack.
Zardari mentioned the need for all issues, including Sir Creek, Siachen and Kashmir to be addressed.
"Both felt that we need to move forward step-by-step," Mathai said.
After their meeting, Singh and Zardari made their statements.
Singh said the two countries were willing to find "practical, pragmatic" solutions to a "number of issues", adding that he had taken "advantage" of Zardari's private visit to discuss with him all bilateral issues.
Zardari said " we have had very fruitful bilateral talks " and hoped to meet the Indian leader on Pakistani soil very soon.
As an indication of the progress of bilateral engagement between the two sides despite the tough talk on terrorism, sources said Islamabad indicated it was seriously looking at the India-China model of bilateral relations, which is to put the contentious issue on the backburner and work for significant gains in their trade and commercial ties.
The PM wanted a liberalised visa regime for promoting people-to-people contact that the two countries desire to usher in.
He also appreciated the steps taken by Pakistan to take forward trade ties by moving to the negative list regime.
The two leaders felt an agreement could be reached when the home/interior secretaries meet shortly.