The year started off with the beheading of a soldier inside Indian territory along the Line of Control and the mutilation of another in January. (Agencies)
India reacted to the development by suspending bilateral talks that had resumed in early 2011 after being put on hold over the brazen assault on India's financial hub by members of the Pakistan-based Lashkar-e-Taiba.
PML-N chief Nawaz Sharif, who became Prime Minister for a record third term after his party swept the general election in May, spoke often about peace with India but tensions continued on the LoC for months with both sides accusing each other of violations of the 2003 ceasefire.
Things reached a boiling point in August, when a raid carried out by the Pakistani special forces killed five Indian soldiers.
The period till mid-November was marked by ceasefire violations on the LoC which claimed the lives of at least 11 Indian soldiers.
The Pakistan Army blamed India for ceasefire violations and said that at least five of its soldiers died in incidents of firing. Pakistan also said that it lost several civilians in Indian shelling.
The ceasefire violations continued even after Prime Minister Manmohan Singh met his Pakistani counterpart Nawaz Sharif in September in New York on the sidelines of the UN General Assembly.
Suspense about the meeting prevailed till a few days before they actually met and hectic backdoor diplomacy was put into motion to ease tensions.
Ahead of his meeting with Nawaz Sharif, Manmohan Singh asked Pakistan to shut down ‘terrorist machinery’ on its soil while making it clear that there can ‘never, ever’ be a compromise on the territorial integrity of India of which Jammu and Kashmir is an integral part.
Speaking at the UNGA, Manmohan Singh also virtually rejected Sharif's demand for resolution of the Kashmir issue on the basis of Security Council resolutions, saying that India favoured settlement of all issues on the basis of the Simla Agreement.
Though the two leaders decided that the Directors General of Military Operations should meet to address the tensions on the LoC, the military officials met only on December 24 and agreed to re-energize mechanisms to maintain the truce.
The tensions also had a negative fallout on the much publicized liberal visa agreement signed by both sides in 2012.
Several features of the new visa regime were implemented after several months of delay. Even now, the group tourist visa scheme is yet to be implemented.
On the trade front, Pakistan has still not given India the Most Favoured Nation (MFN)-status, which was supposed to have been granted on January 1 and Finance Minister Ishaq Dar even said that his government would not make forward movement on the measure due to prevailing tensions.
For Pakistan, 2013 was historic as a civilian government completed it full term and handed over power to another democratically elected government for the first time in the country's history.
Asif Ali Zardari too was able to complete his five-year term as President, marking a change from the past marked by frequent interventions by the powerful military, which has ruled Pakistan for most of the time since it was formed in1947.
Another major development was the return of former president Pervez Musharraf to Pakistan. He lived in self-exile for about five years and returned in March to contest polls, but was hauled to court in different cases including one over the assassination of former premier Benazir Bhutto.
Since then, Musharraf has been granted bail in all four major cases against him. He is now facing trial in a special court on a charge of treason for imposing emergency in 2007.
In addition to tackling a raging Taliban insurgency and a flagging economy, the new government led by Sharif faced a key challenge when the tenure of Army Chief General Ashfaq Parvez Kayani ended in November and his successor had to be chosen.
Kayani, given an unprecedented three-year extension by the previous government, announced in October that he would retire on November 29 as scheduled. The announcement provided relief to the government and Sharif, who was ousted in a 1999 coup by then Army Chief Pervez Musharraf.
However, Sharif did not announce the name of the new Army Chief till hours before Kayani was about to retire. Though Sharif had said prior to the elections that he would go by seniority, he chose the third highest ranked general, Raheel Sharif, as the new Army Chief.
The year started off with the beheading of a soldier inside Indian territory along the Line of Control and the mutilation of another in January.