The Indian Government says it is restoring the right of Pakistani civilian aircraft to fly over India to third countries with immediate effect.

The conciliatory move comes after intense diplomatic pressure on the nuclear rivals aimed at bringing them back from the brink of war.

There are some indications of a diminution of infiltration, so we felt this response was warranted

Indian Foreign Ministry

The Indian Foreign Ministry said the restrictions were being lifted in response to a reduction in the infiltration of Islamic militants from Pakistani territory.

A Pakistani Foreign Ministry spokesman welcomed the move as a step in the right direction, but said "a lot more needs to be done".

India is also reportedly planning to appoint a new high commissioner to Pakistan and to recall some of its warships to port.

British Foreign Secretary Jack Straw announced in London that he had been informed of the plans in a telephone conversation with his Indian counterpart, Jaswant Singh.

It is a step in the desired direction

Pakistan Foreign Ministry

Indian Foreign Ministry spokeswoman Nirupama Rao made no comment on either issue, or on dialogue with Pakistan.

Meanwhile, tension between the two countries appeared to be easing in Kashmir, with both sides saying they had scaled back shelling across the Line of Control (LoC).

The BBC's Jill McGivering in Delhi say the Indian announcement is the latest in a series of indications that the worst of the crisis may now be over.

Steps to peace

India imposed the flight ban after a suicide attack on its parliament in December, which it blamed on Pakistan-backed militants.

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The Indian Foreign Ministry said further confidence-building measures would follow when India saw more evidence that cross-border militancy had stopped for good.

"This is a sequenced reaction," spokeswoman Nirupama Rao said.

Earlier on Monday, United Nations Secretary General Kofi Annan said he was encouraged because neither country wanted war.

"But, of course, when you have a million men confronting each other, anything can happen. An accident could happen," he told Reuters news agency.

Militant arrest

	Rising tension: 1 October 2001: 38 killed in attack on the Kashmir assembly in Srinagar 13 December 2001: 14 killed in attack on the Indian parliament building in Delhi 14 May 2002: More than 30 killed in attack on an Indian army camp in Kashmir 21 May 2002: Moderate Kashmiri politician Abdul Ghani Lone shot dead South Asia's high nuclear stakes

Troops continued to fire shots at each other in Kashmir but the heavy artillery guns were largely silent, according to reports from the disputed region.

Indian shelling killed a 16-year-old girl, however, in southern Kotli district, authorities in Pakistan-administered Kashmir said.

And in Badgam district, in Indian Kashmir, security forces said they killed two Islamic militants belonging to the Pakistan-based Al-Badr group in a gun battle.

Monday's relative calm, after a weekend in which shelling killed 10 people, followed comments by Pakistan's President Pervez Musharraf that "the threat of war... has diminished".

Pakistan's authorities did, however, criticise India for the arrest of a Kashmiri separatist leader, Syed Ali Shah Geelani, at his home on Sunday.

Indian police said they were acting on information that Mr Geelani had received tens of thousands of US dollars from Pakistani intelligence sources to fund militant groups.

General Musharraf is in the United Arab Emirates on a trip which will also include Saudi Arabia in order to brief "brotherly Muslim countries on the situation in the region", a spokesman said.

He will return to Pakistan in time to meet US Defence Secretary Donald Rumsfeld who will visit both Pakistan and India this week.

Pakistan told his deputy, Richard Armitage, last week that it would endeavour to stamp out cross-border infiltration, while India promised to take some conciliatory steps.