WASHINGTON: Despite a spike in tensions between South Asia's nuclear rivals, India's envoy to Washington said Friday her country wants closer trade ties with Pakistan.

Nirupama Rao also said that overland trade from war-battered Afghanistan to India via Pakistan would be a boon to regional stability.

Her comments at the Center for Strategic and International Studies think tank come despite a fraying in recently improved relations between the nuclear rivals that was driven by the mutual benefit they can get from more commerce.

In a reminder of the core issues that divide them, India this week accused Pakistan of involvement in a militant attack in Kashmir, the Himalayan territory they both claim and have fought two wars over.

On Thursday, Pakistan's parliament condemned India's hanging of a Kashmiri man convicted in a terror attack New Delhi blamed on Pakistan, drawing an angry reaction from India.

Rao did not directly address the current tensions but said whatever their differences, India and Pakistan cannot ignore the fact they are close neighbours. She said it was “very encouraging” that Pakistani businessmen in particular have a great desire to open trade with India. Much of the current trade goes through third-countries or illegal channels.

Pakistan announced in late 2011 that it would grant India “Most Favoured Nation” trade status, which would reduce tariffs. That step was seen as significant as it signaled support from Pakistan's powerful army for more trade as the troubled nation's economy stutters. Last September, the two countries signed a visa agreement to ease travel by businesspeople and tourists.

“Pakistan has assured us that it's going to provide MFN status to India. We are waiting for that decision to be announced formally and implemented. That will certainly boost confidence and clear the way for closer trade ties,” Rao said.

The ambassador also made a pitch for the prospect of more trade from Afghanistan, which has itself been a source of India-Pakistan dispute as the two countries have vied for influence in the region.

Rao said Afghanistan is a potential trade hub linking Central and South Asia. “We have to insure Afghanistan can fulfill that role for its own stability and well-being and our well-being in the region. Transit and trade for Afghanistan through Pakistan into India is important in that context,” she said.

State Department spokeswoman Victoria Nuland reiterated strong US support Friday for India-Pakistan dialogue. She said they have made good strides on economic cooperation and on visas.

“We want it to continue and be expanded to security concerns they have with each other,” Nuland told a news briefing.