Prime Minister Atal Bihari Vajpayee on Monday met Pakistan President Pervez Musharraf -- first formal meeting in two years after the failed Agra summit.

Vajpayee drove to Aiwan-e-Sadar (President's house) for the meeting, which has been described by the Indian side as a 'courtesy call'. The meeting lasted over an hour.

Musharraf welcomed Vajpayee with a characteristic firm handshake and the two exchanged pleasantries before they held discussions.

Both Vajpayee and Musharraf, who came face-to-face last night at the banquet hosted by the Pakistani president, looked relaxed and smiling in between their initial remarks.

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External Affairs Minister Yashwant Sinha, National Security Adviser Brajesh Mishra, Foreign Secretary Shashank and Indian High Commissioner Shivshankar Menon accompanied Vajpayee.

The Pakistani side, which was expecting the meeting to lead to an early resumption of the bilateral dialogue process, said after the meeting that issues of mutual interest figured in the parleys.

State-run PTV said the meeting ended on a 'positive note'.

Shashank also met his Pakistani counterpart Riaz Khokhar on Monday as a follow-up to the meeting between Vajpayee and Pakistani Prime Minister Mir Zafarullah Khan Jamali.

It was a 'courtesy call' lasting about half-an-hour, a Ministry of External Affairs spokesman said.

Vajpayee last night attended a banquet hosted for him and other SAARC leaders by Musharraf.

Before going for his meeting with Musharraf, Vajpayee said he was going for a courtesy call. He was replying to a question whether bilateral issues would be discussed with Musharraf.

At the foundation stone laying function for residential complex at the Indian High Commission, he told reporters: "I know you have only one question to ask of me. Now I am going to meet him (Musharraf)."

At the ceremony Vajpayee said India and Pakistan should increase their diplomatic strength in each other's capital.

"New questions have arisen. New answers are being sought. It is important that we have more representation in each others countries," he said.

"Communication lines between the two countries should continue. We should end each others problems and try to find an amicable solution," Vajpayee said.