Washington:  "India is today  (Jan 10,2007) recognised in Washington as a 'dominant actor', 'a nascent major power' and a 'natural partner' of the US in South Asia, long considered a 'strategic backwater' from its perspective," says a US Congressional report.

With South Asia emerging in the 21st century as increasingly vital to core US foreign policy interests, India, the region's dominant actor with more than one billion citizens, is also viewed by many analysts as a potential counterweight to China's growing clout, said the report in an update on India-US Relations.

Washington and New Delhi have since 2004 been pursuing a 'strategic partnership' based on shared values such as democracy, multiculturalism and rule of law, stated the Congressional Research Service (CRS) report prepared for newly elected US lawmakers.

Numerous economic, security, and global initiatives, including plans for 'full civilian nuclear energy cooperation' are underway, it said noting that the latter initiative reverses three decades of US non-proliferation policy.

It would require, among other steps, conclusion of a peaceful nuclear agreement between the United States and India, which would itself enter into force only after a Joint Resolution of Approval by Congress.

"Also in 2005, the United States and India signed a 10-year defence framework agreement that calls for expanding bilateral security cooperation. Since 2002, the two countries have engaged in numerous and unprecedented combined military exercises. The issue of major US arms sales to India may come before the 110th Congress," it said.

"The influence of a growing and relatively wealthy Indian-American community of more than two million is reflected in Congress's largest country-specific caucus, "CRS noted.

"Further US interest in South Asia focuses on ongoing tensions between India and Pakistan, a problem rooted in unfinished business from the 1947 Partition, competing claims to the Kashmir region and, in more recent years, "cross-border terrorism" in both Kashmir and major Indian cities," it said.

In the interests of regional stability, the United States strongly encourages an ongoing India-Pakistan peace initiative and remains concerned about the potential for conflict over Kashmiri sovereignty to cause open hostilities between these two nuclear-armed countries.

The United States seeks to curtail the proliferation of nuclear weapons and ballistic missiles in South Asia. Both India and Pakistan have resisted external pressure to sign the major non-proliferation treaties, the report said.

In 1998, the two countries conducted nuclear tests that evoked international condemnation. Proliferation-related restrictions on US aid were triggered and later lifted through congressional executive cooperation from 1998 to 2000.

Remaining sanctions on India (and Pakistan) were removed in October 2001, CRS noted.

India is in the midst of major and rapid economic expansion. Many US business interests view India as a lucrative market and candidate for foreign investment.

The United States supports India's efforts to transform its once quasi-socialist economy through fiscal reform and market opening.

"Since 1991, India has taken steps in this direction, with coalition governments keeping the country on a general path of reform. Yet there is US concern that such movement remains slow and inconsistent," CRS said.