The leaders of India and Pakistan will meet on the sidelines of a regional summit this week, as the nuclear-armed rivals seek to push a tentative rapprochement in their fractious relationship.

Talks between Indian Prime Minister Manmohan Singh and Pakistani counterpart Yousuf Raza Gilani will take place at the summit of South Asian Association for Regional Cooperation (SAARC) nations that opens on Thursday in the Maldives.

Their meeting follows what Indian Foreign Secretary Ranjan Mathai described as 'positive indicators' from Pakistan in recent weeks that it is serious about reducing tensions.

An Indian military helicopter which strayed into Pakistani territory last month was promptly released along with its crew and returned to India, avoiding what in the past could easily have escalated into a diplomatic row.

And last week the Pakistani cabinet approved a proposal to grant India the status of "most favoured nation" in a move towards normalising trade relations.

"These are I would say indications of forward movement," Mathai said, adding that "all aspects" of the India-Pakistan relationship would be discussed during the Singh-Gilani talks.

The two prime ministers last met in March when Gilani accepted Singh's invitation to watch the India-Pakistan cricket World Cup semi-final. They last held formal talks at the 2010 SAARC summit in Bhutan.

India and Pakistan have fought three wars since independence in 1947, two of them triggered by their territorial dispute over Kashmir, which remains a major hurdle in any future comprehensive peace deal.

A full peace dialogue -- suspended by India after the 2008 Mumbai attacks blamed on Pakistan-based militants -- was resumed in February this year.

The process remains tentative with only incremental progress on uncontentious issues such as trade.

Talks between the neighbours' foreign ministers in July failed to produce a major breakthrough, but both sides signalled a warming of ties, with Pakistan's top diplomat Hina Rabbani speaking of a "new era of cooperation."

But efforts to reduce tensions have been complicated by the increasing influence of Afghanistan in the bilateral equation.

Indian involvement in Afghanistan is sensitive, with Pakistan vehemently opposed to its arch foe meddling in what it considers its backyard.

Islamabad's suspicions were fuelled when Afghanistan and India signed a strategic partnership pact last month.

Afghan President Hamid Karzai will also attend the SAARC summit, along with the leaders of other member nations Bangladesh, Bhutan, the Maldives, Nepal and Sri Lanka.

Previous summits of the regional body have been largely overshadowed by the India-Pakistan dynamic -- a fact that Mathai acknowledged with regret.

"We would like the focus to remain essentially on the common business of SAARC... and hope that the focus will not be diverted to one single event," he said.

The summit is being held in Addu, on the southern Maldives' island of Gan -- formerly a remote World War II outpost that is now emerging as an upmarket holiday destination.

The British Royal Navy established a secret wartime base on Gan in 1941 which was then handed over to the Royal Air Force in 1957 and remained in intermittent service until British forces pulled out in 1976.

Gan is now becoming a popular destination for Japanese honeymooners and well-heeled European and Chinese holiday makers.

South Asian leaders will be put up at the Shangri-La Villingili Resort and Spa, where a villa can cost up to $2,000 a day.