"Significantly the ceasefire is holding since November 25, 2003 and both sides are committed to continuing it," Singh said after two days of foreign minister-level talks with Pakistan in New Delhi.
Singh, however, said cross-border militancy had not ebbed despite assurances given by Pakistan President Pervez Musharraf.
"I would like to recall the joint press statement of January 6 this year and the reassurance by President Musharraf that he would not permit any territory under Pakistan's control to be used to support terrorism in any manner," Singh added.
"Cross-border infiltration remains a serious concern and I have reiterated our concern to Pakistan foreign minister Kasuri."
The ceasefire was set up by the previous government under ex-prime minister Atal Behari Vajpayee, seven months after he extended a historic "hand of friendship" to Pakistan in April 2003.
The truce has brought peace to both the disputed and undisputed borders of Kashmir, which for decades had been rocked almost daily by mortar and artillery fire between the rival armies ranged across the divide, causing both military and civilian casualties.
News of the continuation of the truce was greeted with joy by Kashmiris living along the Line of Control, the de facto border splitting Kashmir between India and Pakistan.
"Thanks to Allah the two sides have decided to continue with the ceasefire," said Abdul Aziz, a resident of Uri, a town close to the Line of Control.
"The ceasefire has changed our lives. We can now move freely and even tend to our fields," Aziz told AFP by telephone.
Uri has been hit in the past by artillery shells damaging property and crops, and killing civilians.
Mohammed Rafique, a chef at Hill View hotel in the border town of Drass, 130 kilometers (80 miles) northeast of Indian Kashmir's summer capital Srinagar, hailed the announcement.
"People are enjoying the truce and even the night life has returned," said Rafique by telephone from Drass, one the towns most affected by the once-incessant cross-border firing.
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