Egypt – Top diplomats from India and Pakistan have begun talks to reduce tensions between the two states in a meeting on the fringes of a gathering in Egypt, sources close to the talks said.

The meeting of the two states' foreign secretaries, India's Shivshankar Menon and Pakistan's Salman Bashir, took place late on Tuesday ahead of Wednesday's opening of the Non-Aligned Movement summit in the Egyptian resort of Sharm el-Sheikh.

They had good, detailed discussions, said one source with knowledge of the talks but asking not be identified further.

They are scheduled to meet again later on Wednesday when they will report back to their prime ministers, the source said.

The discussions were to prepare for a meeting on Thursday between Indian Prime Minister Manmohan Singh and Pakistani premier Yusuf Raza Gilani, the third such high-level meeting since last year's Mumbai attacks derailed any rapprochement.

But hopes for a thaw, which could improve stability across the region as far as Afghanistan, have been overshadowed by a row over what India sees as Pakistan's failure to take action against the founder of Lashkar-e-Taiba (LeT), the militant group blamed for last year's attacks on Mumbai.

India said the Mumbai assault was carried out by Pakistani militants who must have had help from Pakistani security agents. Pakistan has denied any involvement by state agencies and says it will prosecute militants suspected of involvement.

Pakistan is keen to revive the five-year-old composite dialogue covering all disputes between the two countries.

But Singh has insisted it must first show it is serious about taking action against LeT, as well as against other militant groups that launch attacks in the Indian part of the disputed Kashmir region and elsewhere in the country.

Pakistani Interior Minister Rehman Malik said at the weekend Pakistan had completed its investigation into five suspects accused of links to the Mumbai attack, and they were expected to be put on trial this week.

Pakistan handed a fresh dossier on its probe into the attack to India on Saturday. The suspects include Zaki-ur-Rehman Lakhvi, a commander of LeT.

Singh, who has said he was willing to meet Pakistan more than half way if it cracked down on militants, may be prompted to make a conciliatory gesture ahead of a visit to India by U.S. Secretary of State Hillary Clinton.

The United States is keenly interested in resumption of talks between the two countries to ease tensions on Pakistan's eastern border with India, so it can focus on fighting Taliban militants on its western border with Afghanistan.

(Editing by Edmund Blair)