Afghanistan's new president has told the leaders of India and Pakistan he would not let his country become the battleground of a proxy war as South Asian country leaders meet during a regional summit.

The leaders of the eight South Asian Association for Regional Cooperation (SAARC) countries are meeting for the first time since the election of a new Indian government eager to improve ties in the face of growing Chinese influence in its backyard.

Nuclear-armed neighbours India and Pakistan - bitter rivals since gaining independence from Britain in 1947 - have long accused each other of using proxy forces to try to gain influence in Afghanistan.

President Ashraf Ghani issued his warning to South Asian leaders meeting in the Nepalese capital Kathmandu to try to reinvigorate regional cooperation held back by decades of rivalry between India and Pakistan.

"We will not allow our territory to be used against any of our neighbours. But we will not permit anybody to conduct proxy wars on our soil either," he told the gathered leaders including Indian Prime Minister Narendra Modi and Pakistan's Nawaz Sharif.

Ghani's predecessor Hamid Karzai frequently accused Pakistan of trying to destabilise the Kabul government by giving sanctuary to Taliban fighters.

India, the largest regional investor in Afghanistan, is building a huge new parliament in Kabul and funding new roads, dams, infrastructure and reconstruction.

SAARC trade

Regional leaders at the meeting also stressed the need for greater cooperation to combat poverty in South Asia, where cross-border trade remains minimal, held back by mistrust and weak infrastructure.

"My vision for our region is a dispute free South Asia where instead of fighting each other we jointly fight poverty, illiteracy, disease, malnourishment and unemployment," said Pakistan's Sharif.

On Tuesday Modi oversaw a $1bn agreement to build a hydropower plant in neighbouring Nepal [AFP]

During his speech, Modi pointedly referred to deadly attacks in Mumbai exactly six years ago, which were blamed on Pakistani fighters and led to the collapse of peace talks between the two countries.

"In 2008 we felt the endless pain of lost lives. Let us work together to fulfil the pledge we have taken to combat terrorism and transnational crime," he said.

Modi will hold one-on-one meetings with all the SAARC leaders except Sharif, according to an Indian official who said Islamabad had not requested a meeting.

Sharif said the ball was in India's court after New Delhi cancelled senior-level talks earlier this year.

On Tuesday Modi oversaw a $1bn agreement to build a hydropower plant in neighbouring Nepal, where China has invested heavily in recent years, saying he wanted to "move forward" with deals long delayed by mutual mistrust.

Modi said India would lead a drive to boost regional trade, committing to lower his country's large trade deficit with other South Asian nations and make it easier for goods to cross its borders.

He also pledged to launch a communications satellite dedicated to the SAARC nations by 2016.

Trade between the SAARC nations - Afghanistan, Bangladesh, Bhutan, India, Nepal, the Maldives, Pakistan and Sri Lanka - has grown from under $140m in 2008 to $878m in 2012, according to SAARC figures.

But it still accounts for less than five percent of the region's total commerce, according to the Washington-based Brookings Institution.

Source: Agencies