"Pakistan is not backtracking," said foreign office spokeswoman Tehmina Janjua after a senior Indian official earlier said Pakistan was bowing to domestic business interests opposed to finalising MFN status.
(Read: Business community welcomes MFN status to India)
"Pakistan clearly stated that our cabinet gave approval to move forward on MFN status in principle," she said.
Reuters had earlier quoted a senior Indian government source stating that Pakistan had backtracked on granting MFN status to India.
"From the initial announcement of an unconditional grant of an MFN, there appears to be a clear backtrack," the source had said.
Wednesday's announcement was trumpeted on both sides as a milestone in improving fragile relations between the two countries.
India and Pakistan may be home to some 1.4 billion people but bilateral trade flows are paltry, a legacy of mistrust between the neighbours.
The hope is that an increase in trade will feed into wider trust between the two countries and help the rivals resolve major flashpoints like the disputed Kashmir region, although a solution to this problem has proved intractable for decades.
The two sides have also pledged to liberalise restrictions on business visas, curb non-tariff barriers and bolster trade on their land border. As things stand, exporters are forced to route many goods via third parties such as Dubai, slowing delivery times and upping costs.
Less than one percent of India's merchandise exports are sold to Pakistan, in terms of dollar value, but in September a joint statement pledged to double bilateral trade flows within three years to about $6 billion.
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