Modi and Xi, meeting for the first time in the informal summit format since their talks in Wuhan a year ago, had "excellent discussions" and they agreed to continue with the practice of holding such informal summits.
"Sources said the two leaders are expected to issue some directions at the end of the summit on Saturday as they did after the first edition of new format of engagement in Chinese city of Wuhan previous year".
This year's one-in-one spelled "the start of a new era in India-China relations", PM Modi offered. But "that does not detract from the positive effect that an interpersonal relationship at the leadership level" have in building a larger relationship, he said. The two leaders spent five hours of "quality time".
Gokhale said the two countries chose to set up a group at the finance ministers' level to discuss trade and investment issues, especially India facing a whopping $63 billion trade deficit with China.
Before the delegation level talks, Xi and Modi held a one-on-one discussion lasting about an hour at the Fisherman's Cove resort, sending a clear signal of an intent to refashion ties for greater bilateral cooperation. India in particular is concerned by China's US$57 billion surplus in their joint trade.
India and China share a almost 4,000 km border, most of which is disputed.
The two leaders took a stroll along the beach front and were seen having an engaging discussion.
When Mr Xi said he supports Pakistan's "legitimate rights", India's foreign ministry thundered it was "not for other countries to comment on the internal affairs of India". Gokhale said the leaders talked about enhancing trade and investment, "and this also obviously included the issue of the trade deficit".
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The Indian Express newspaper had earlier quoted unnamed sources as saying Mr Modi would "explain to the Chinese president the reasons behind Delhi's decision on Kashmir".
China's backing of Pakistan "has left a very bad taste in India's mouth", Pant said.
Despite the summit's relaxed nature, the ambassador said it is expected to provide direction to officials on both sides so they can "address better the issues that we have been dealing with over a long period of time". These could also be in third countries, he added later.
On commerce, India and China are both facing a protectionist United States and want greater access to each other's markets. Wuhan spirit has given our ties a new momentum and trust.
Besides emphasizing the expansion of trade and investment, Modi and Xi resolved to work together in facing the challenges of radicalization and terrorism, Gokhale said.
There was no discussion on India scrapping an article of its constitution that gave special status to Kashmir that has been a trigger for some sharp exchanges between India and China in recent days.
The seaside meeting, aimed at mending relations, came after India irked China by its August move to split Jammu and Kashmir in two. "A new era of cooperation will begin today through "Chennai Connect", Modi said while referring to the outcome of the first informal summit between the two leaders in the Chinese port past year.