South Asian leaders are gathering in Bangladesh this week for their annual summit. Tense relations between nuclear rivals, India and Pakistan, have overshadowed previous economic meetings. This year is expected to be different because of a growing rapprochement between Islamabad and New Delhi.

As the SAARC summit draws near, India and Pakistan find themselves, once again, on a diplomatic tightrope - with historical disputes and suspicions testing their recent rapprochement.

Just weeks prior to the summit, three bombs killed almost 60 people in crowded markets in the Indian capital New Delhi. Suspicion for the attacks fell immediately on Islamic militants from Kashmir - the contested border region that has caused two wars between India and Pakistan.

New Delhi has long blamed Pakistan for supporting the militants who want all of mostly-Muslim Kashmir to be independent or to merge with Pakistan.

But this time leaders showed restraint. Indian Prime Minister Manmohan Singh called the Pakistani leader to say there was evidence of a "foreign connection" to the bombings, but he stopped short of making accusations against Pakistan.

Pakistan President Pervez Musharraf, who has committed to stopping cross-border attacks, was quick to condemn the Indian market blasts as a "dastardly" terrorist act.

"I would like to give the total and unequivocal support from Pakistan in any investigation India would like to carry out," he said. "And may I say that Pakistan stands with India on this act of terrorism that has been perpetrated in New Delhi."

Analysts say this is further evidence of both governments' commitment to keep ongoing peace talks on track.

Bharat Karnad, with the independent New Delhi-based Center for Policy Research, notes there is a new maturity showing in the bilateral relationship.

"It's also an acknowledgement that not all those rogue elements in Pakistan are controlled by the President of Pakistan or the Pakistan Army," said Mr. Karnad. "There might be rogue elements within the army and ISI and so on. And that insofar as the Pakistan government does not seem to have a direct hand in orchestrating these events, well, the Pakistan government should be given the benefit of the doubt."

For nearly two years, India and Pakistan have been in delicate negotiations to end their decades-old dispute over Kashmir.

Most recently, the shared tragedy of the October 8 earthquake in Kashmir raised hopes that the peace process could be pushed further. India and Pakistan made the unprecedented decision to open up crossing points along the Line of Control, Kashmir's disputed border.

The move makes humanitarian relief efforts easier and allows families on each side of the LOC to search for loved ones they had not heard from since the deadly quake killed more than 70,000.

Warming ties may mean that power rivalry will not dominate the SAARC summit as much as in the past.

SAARC groups India, Pakistan, Nepal, Bangladesh, Sri Lanka, Bhutan and the Maldives, and its annual summit is meant to be a forum for improving regional economic integration. Until now, India and Pakistan's disputes over cross-border terrorism and Kashmir have overshadowed SAARC's ability to push economic growth.

Analysts say economics is, in fact, now a major driving force behind Indian-Pakistan rapprochement - one that could radiate throughout the region.

Raja Mohan, with the Jawharlal Nehru University in New Delhi, says SAARC meetings and India's booming economy are starting to convince Pakistan of the benefits of minimizing political differences.

"Pakistan can emerge as a trade and transit corridor. Now Pakistanis are beginning to see the advantages of free trade with India, but the political leadership continues to condition greater economic cooperation on the Kashmir question," added Mr. Mohan. "So it is really up to the Pakistanis to find the right balance with economic and political interests. But eventually, I think the economic logic will prevail."

With a new spirit of cooperation prevailing, this SAARC summit is also expected to address ways to improve regional cooperation after natural disasters struck with force. This year saw not only the Kashmir earthquake but also December's Indian Ocean tsunami. Tens of thousands of people have died and hundreds of thousands are homeless.

Officials of the seven SAARC nations will look to increase their stake in each other's welfare, in the hopes it will unlock dangerous political disputes like the ones between India and Pakistan.