SRINAGAR India and Pakistan are due to start trading on Tuesday between their divided zones of Kashmir, raising hopes that the revolt-hit region could be see a major drop in tensions.

'The step will go a long way to cooling tempers in (occupied) Kashmir,' said Tahir Mohiudin, the editor of Urdu-weekly Chattan in Kashmir, where a separatist insurgency has raged since 1989.

The countries, who have fought two of their three wars over Kashmir, are to resume trade across the heavily militarised Line of Control, a key demand of separatists who this summer led some of the largest-ever anti-India demonstrations in the region.

The weeks of protests began over a row to provide land to a Hindu pilgrim trust, sparking Muslim anger.

A government decision to reverse that order because of the anger then prompted a punishing blockade by Hindu hardliners of the only road linking the Kashmir valley with the rest of India.

'Opening the trade route to Pakistan will have a psychological impact. It will create a confidence in people that even if the Indian route is shut, they have an alternate route (for trade),' Mohiudin said.

Anything calming tensions would be good news for Indian authorities, who announced plans on the weekend to press ahead with polls in occupied Kashmir later this year despite the recent upheavals in the state.

The business community is delighted at the move.

'Im hopeful Ill be doing business soon with people in Azad Kashmir (Pakistan-held Kashmir) and Pakistan,' said Abdul Hameed, who owns an electrical generator company.

Business leaders from the divided zones have already met in occupied Kashmir to discuss the opening of trade. Hameed said the blockade convinced them of the need for an alternative trade route.

The first link to be opened on Tuesday will be between Srinagar and Muzaffarabad, the main town in Azad Kashmir.

The second trade route, expected to be opened at a later date, connects Poonch in southern occupied Kashmir with Rawalkot village in Azad Kashmir.

A bus service was launched between the two sides in 2005, the first fruit of a peace process begun the previous year by the two countries.

The opening of the trade between two parts of the disputed region will go a long way toward building confidence among the Kashmiri traders, who suffered losses due to the recent economic blockade.

'The blockade created fear. If it happened once, it can happen again,' said Amin-bin Khaliq, adding he suffered big financial losses over the summer as he couldnt export dry fruit in time.

'India is a good market but if were able to sell our goods in Azad Kashmir it will be a huge bonus,' said Khaliq.

Separatists have welcomed the opening of the trade route.

'The time has come when we should move forward towards economic as well as political freedom,' said Mirwaiz Umar Farooq, adding the route could turn out to be a 'first step towards a political resolution' of the Kashmir issue.