Factbox: Main problems between India and Pakistan

(Reuters) - The prime ministers of nuclear-armed rivals Pakistan and India will meet in Bhutan on Thursday in what is likely to be another step in improving their frayed relations.

Pakistani Prime Minister Yusuf Raza Gilani and his Indian counterpart, Manmohan Singh, are in Bhutan for a summit of South Asian leaders.

Here are some of the main problems between the neighbors, who have fought three wars since independence from British rule in 1947, and whose relations have been strained since a militant attack on the Indian city of Mumbai in November 2008.

SECURITY

For India, security is the top issue. It has refused to resume a series of talks on problems, known as the composite dialogue, until Pakistan takes more action against Pakistan-based militant groups. In particular, India wants Pakistan to show it is serious in reining in the militants behind the Mumbai attacks, in which 166 people were killed. India suspects Pakistani security agents support some anti-India groups. Pakistan denies that and says the peace process should not be held hostage to "non-state actors".

KASHMIR

The mostly Muslim Himalayan region of Kashmir is at the heart of hostility between the neighbors and was the cause of two of their three wars (the third was over the founding of Bangladesh).

Separatists backed by Pakistan began an insurgency against Indian rule in 1989 and tens of thousands of people have been killed. Most fighters want Kashmir to become part of Pakistan but many ordinary Kashmiris want independence from both India and Pakistan.

A November 2003 truce has largely held along the so-called Line of Control dividing Kashmir, despite occasional clashes.

Former Pakistani president Pervez Musharraf offered in 2003 to set aside a longstanding demand to implement U.N. resolutions for both sides to withdraw troops and for Kashmiris to decide in a vote on whether to be part of India or Pakistan.

He later suggested Pakistan would give up its claim over Kashmir if India agreed to soften the Line of Control and let Kashmiris administer their affairs with oversight from both Islamabad and New Delhi.

India is agreeable to the long-term goal of softening the border, without any redrawing of the ceasefire line, but autonomy and joint oversight go further than India wants. Musharraf's moves to break the deadlock were criticized in Pakistan for giving away too much and the government that came to power in 2008 has distanced itself from his concessions.

WATER

The two countries disagree over use of the water flowing down rivers which rise in Indian Kashmir and run into the Indus river basin in Pakistan.

The use of the water is governed by the 1960 Indus Water Treaty under which India was granted the use of water from three eastern rivers, and Pakistan the use of three western rivers.

Pakistan says India is unfairly diverting water with the upstream construction of barrages and dams. Pakistan, dependent on the water to produce food for its growing population and to underpin its economy, wants to put water at the top of the agenda, with Kashmir. India denies any unfair diversion of water.

SIACHEN

Indian and Pakistani forces have faced off against each other in mountains above the Siachen glacier in the Karakoram range, in what is the world's highest battlefield, since 1984.

The two sides have been trying to find a solution that would allow them to withdraw troops, but India says it is unwilling to bring its forces down until Pakistan officially authenticates the positions they hold. Pakistan has said it is willing to do so but on the condition that it is not a final endorsement of India's claim over the glacier.

SIR CREEK

Another boundary dispute is over the 100-km (60-mile) Sir Creek estuary flowing into the Arabian Sea. The dispute has hampered exploration for oil and gas and led to the detention of hundreds of fishermen from the two countries, mostly in areas where demarcation is unclear. The two sides have conducted a survey and exchanged maps showing their respective positions.

AFGHANISTAN

Afghanistan has become a major source of friction although Indian and Pakistani differences over Pakistan's western neighbor have not been a part of their official talks.

The two countries have long competed for influence there and Pakistan is deeply suspicious of a rise in India's presence after the fall of the Taliban in 2001. It accuses India of using Afghanistan as a base to create problems inside Pakistan, including backing separatists in its Baluchistan province. India denies the accusations, saying its focus is on development.