The directors general of military operations of both the sides recently decided to take steps to de-escalate tensions.
Fahim and Commerce Secretary Munir Qureshi were scheduled to visit India during January 27-29 to participate in a Partnership Summit being organised in Agra.
The Pakistani minister was invited to the meet by his Indian counterpart Anand Sharma.
An aide to Fahim had last week denied that his visit to India had been cancelled. The aide had told PTI that a formal proposal regarding the visit had even been forwarded to the prime minister's office.
Official sources said Prime Minister Raja Pervez Ashraf was in the loop about the decision to call off Fahim's visit.
In recent weeks, differences had emerged between Fahim and Foreign Minister Hina Rabbani Khar over the issue of giving Most Favoured Nation-status to India.
Media reports have said that Khar has held Fahim responsible for the delay in giving MFN-status to India.
Pakistan missed the December 31 deadline for phasing out a negative list regime for trade and giving MFN-status to India.
Fahim subsequently said the process had been delayed.
There has been no official word on when Pakistan will complete the process and reports have suggested that the matter may be left for the new government that is elected in polls scheduled to be held by mid-May.
Fahim is among a group of ministers who have contended that the concerns of several industries should be addressed before MFN-status is granted to India.