India has welcomed Pakistan's decision to give most favored nation (MFN) status to India, saying it would stimulate trade and political ties between the two neighbors, according to local media reports on Thursday.

Indian Minister of Commerce and Industry Anand Sharma said on Wednesday that India "deeply appreciates this positive gesture that Pakistan has taken" in granting MFN status to India.

"When bilateral economic engagement improves, it brings prosperity and growth to both the partners," he said, adding "it opens new pathways of alleviating our economic engagement to a much higher level".

Sharma also said the move would "influence definitely in positive manner" the political relations between the two countries.

As a neighbor and friend of India and Pakistan, China will continue to support the two sides to improve relations through dialogue and cooperation and accomplish joint development, Chinese Foreign Ministry spokesman Hong Lei said on Thursday.

Both India and Pakistan are important countries in southern Asia, Hong said, adding that their improving bilateral relations are vital for the area's peace, stability, and development.

The federal cabinet of Pakistan on Wednesday approved to grant the status of MFN to India and agreed to boost the bilateral trade volume from $2.5 billion to $5 billion.

The cabinet meeting was chaired by Prime Minister Yousuf Raza Gilani in capital city of Islamabad. The move would help to expand bilateral trade relations.

After the decision Pakistan would loosen the import restrictions from India.

Visa policies between the two countries would be relaxed, and both sides would also remove non-tariff barriers and all other restrictive practices.

The reciprocal MFN status shows that the bilateral relations are improving, starting with trade ties, said Liu Xiaoxue, an expert on the South Asia at the Chinese Academy of Social Sciences.

However, this status, as a basic principal for international trade, cannot necessarily lift India-Pakistan trade to a ground-breaking level, she said.

"Pakistan's decision only serves to normalize its trade ties with India, even though the trade volume is quite small," Liu said, adding that the real breakthrough lies in both countries' domestic stability, growing economic strength and openness to each other, which are yet to come.