By Matthias Williams
NEW DELHI (Reuters) - Arch rivals India and Pakistan agreed on Wednesday to further liberalize trade in a tentative move seen as bolstering a fragile peace process between the two nuclear-armed rivals.
The meeting between the neighboring countries' trade ministers was part of this year's resumption of formal peace talks, which were broken off after Pakistan militant attacks in 2008 that killed 166 people in Mumbai.
India's Trade Minister Anand Sharma, who met with his Pakistan counterpart Makhdoom Amin Fahim, said New Delhi would support a scheme proposed by the European Union to boost textile exports from areas of Pakistan ravaged by floods with duty waivers.
India has previously opposed the EU scheme.
"The meetings between the ministers were very productive and useful," Sharma told reporters, adding it was the first time the two countries' trade ministers had met in 35 years. "We engaged in a frank and constructive manner."
The two sides will meet again in November.
Lasting peace between the two countries is seen as key to stability in the South Asian region and help a troubled transition in Afghanistan as NATO-led forces plan their military withdrawal.
The hope is that trade measures will feed into wider trust between the two countries and help the rivals resolve major flashpoints like the disputed Kashmir region, although a solution to this problem has proved intractable for decades.
India and Pakistan may be home to some 1.4 billion people but bilateral trade flows are paltry -- a legacy of mistrust between the South Asian neighbors who have gone to war three times since their independence from Britain in 1947.
Less than one percent of India's merchandise exports are sold to Pakistan, in terms of dollar value.
(Editing by Alistair Scrutton)