Government hopes amnesty package will woo back fighters stranded in Pakistan.
The foreign secretaries had been expected to discuss security issues and the long-standing dispute over Kashmir.
Shortly after the meeting concluded, Bashir accused India of being counterproductive by focussing on the Mumbai attacks.
“It is unfair and unrealistic and, in our view, counterproductive to … keep the focus on that [Mumbai] to stall the process of the broader relationship between the two countries,” he said.
India has repeatedly demanded that Islamabad take tougher steps against those in Pakistan it suspects of being involved in planning and executing the Mumbai attack.
Bashir said the two nuclear powers needed to “engage on a whole range of issues” and that India should not “lecture us and demand Pakistan does this or that”.
Rao has said comprehensive dialogue cannot get under way until a “trust deficit” is addressed.
“We went into today’s talks with an open mind but fully conscious of the limitations imposed by the large trust deficit between the two countries,” she said.
“In line with our graduated and step by step approach, our aims were modest.”
Al Jazeera’s Kamal Hyder, reporting from the Pakistani capital of Islamabad, said there are political groups in both Pakistan and India that oppose the talks.
“Already opposition groups within Pakistan have said there is no use to the talks because the Indians have not been flexible and have already said that they are not willing to talk on a few issues,” he said.
“There is a realisation here that there is a lot to talk about and a great distance to cover to remove the distrust.
“There has to be a great effort on the part of both these countries if they are serious about trying to hammer out their differences.”
The two nuclear-armed nations have had a rocky history, having fought three wars since winning independence from British colonial rule in 1947.