India unveiled major proposals Wednesday to improve relations with longtime rival Pakistan, and said its No. 2 leader would meet with the Kashmiri separatists it has shunned for 13 years.

The unprecedented steps, designed to reunite families and expand contacts between the two nations after five decades of conflict, were seen here as another step in keeping with the Indian prime minister's recent moves to jump-start peace initiatives ahead of elections next year.

Pakistan responded with disappointment at India's failure to go further by including negotiations with Islamabad on Kashmir (search), although it said the proposals on travel were positive steps.

The proposals cover such human concerns as reuniting families, allowing fishermen to go about their work — and even permitting cricket fans to root during an India-Pakistan match without fear of arrest.

The travel proposals include the resumption of air and rail links, and the new ambition of running of buses between the capitals of divided Kashmir.

The government also announced for the first time that it would meet with members of the separatist movement in India's portion of Kashmir, the Himalayan territory divided between the two South Asian rivals and a flashpoint for two of their past wars.

In Islamabad, a Pakistan Foreign Ministry statement said the proposals to restore travel links, sports competition and to open visa offices outside the capitals "will receive serious consideration by Pakistan."

"Any proposal that is substantive and unconditional and genuinely designed to improve relations will, as always, be positive," said the statement.

But it added that Islamabad was "disappointed" India has rejected Pakistan's offer "to resume substantive and sustained dialogue to resolve all issues," especially the Kashmir dispute. It urged India to reconsider its refusal to resume talks on all subjects, including Kashmir.

The initiatives came as Pakistani and Indian troops traded mortar and artillery fire, killing five civilians and wounding at least eight on Pakistan's side of divided Kashmir, officials in Islamabad said Wednesday. Across the cease-fire line, India said five of its civilians, including two women, were wounded by Pakistani fire. Three suspected rebels also were killed in a gunbattle with Indian soldiers.

Indian Foreign Minister Yashwant Sinha emphasized the "war against terrorism" would continue against Islamic militants who are fighting against Indian control in the region. He also said the proposals did not include direct talks between the nations' leaders.

"Pakistan, we hope, will be persuaded to give up the path of confrontation, the path of violence and come to the negotiating table in a spirit that is necessary to sustain those negotiations and that dialogue," Sinha said.

Sinha said New Delhi must push forward with normalizing relations with its longtime nuclear rival, despite continued attacks by militants in Jammu-Kashmir, India's only Muslim-majority state.

The militants have been fighting for the northern state's independence or merger with Pakistan since 1989, an insurgency that has cost more than 63,000 lives.

India accuses Pakistan of maintaining rebel camps on its territory and helping to arm and sneak them across the line that divides Kashmir, claims Islamabad denies.

India has long insisted the way to peace with Pakistan is through a step-by-step process that involves normalizing trade and people-to-people contacts, before tackling the major sore point of Kashmir. Islamabad insists Kashmir is the central issue, and other disputes would easily be resolved after the main problem is settled.

Since Indian Prime Minister Atal Bihari Vajpayee (search) announced in Kashmir in April that he would try one more time to make peace with Pakistan, the two governments have taken small steps to restore their relations. They appointed new ambassadors and reopened a bus route across the border.

Sinha also said India wants a new bus service linking the capitals of Indian- and Pakistani-controlled Kashmir, a major demand by Kashmiri families who have been divided for decades.

The highway between Srinagar (search) and Muzaffarabad (search) — the capital of Pakistan-controlled Kashmir — holds immense emotional and symbolic value for Kashmiris. It was the lifeline of the province, bringing in oil, salt and other key supplies and linking tens of thousands of families before being shut off in 1947, when the new nation of Pakistan was carved from India at independence.

Sinha said the steps were "part of that normalization process" that began before the December 2001 attack on India's parliament complex, in which 14 people were killed. New Delhi blamed Pakistani-based militants and insisted Islamabad's spy agency was behind the plot to kill Indian politicians.

The two nations severed their air and ground transportation links, reduced embassy staff and deployed hundreds of thousands of troops to their borders in early 2002, preparing for war.

Vajpayee's peace moves in April led to a thaw, but Sinha's pronouncements are the most extensive efforts to heal the wounds from the parliament attack.

India hopes to resume bilateral sporting events, including cricket. The last time the two nations played together in either country was in 1999.

Sinha also announced that India would allow individual senior citizens the right to cross the border on foot. Until now, only groups have been allowed to cross on foot, or by bus.

The foreign minister also said the two countries should stop arresting one another's fishermen at sea and establish links between their coast guards.