Improved India-Pakistan relations notwithstanding, the US apprehends a terror attack on a high profile target could prompt India to "punish Islamabad for its continued support to Pakistan-based militants".
Like last year, the US continues to fear that "an attack on a high-profile target might lead New Delhi to take action to curtail militant capabilities in Pakistan or Pakistani Kashmir and punish Islamabad for its continued support to Pakistan-based militants," a report to be presented to Congress says, Dawn reported on Sunday.
If this happens, "we remain concerned about the potential that such a conflict could escalate," the Department of Homeland Security says in its annual report.
The report also mentions the possibility of a nuclear conflict between India and Pakistan, noting "the prospect of renewed tensions with nuclear-armed India remains despite improved relations" between them.
It expresses a measure of satisfaction over the three-year India-Pakistan peace process and the commitment of both Islamabad and New Delhi to continue with it.
The report also notes that New Delhi's threshold for responding militarily to terrorist attacks has apparently increased since the two countries approached the brink of war in 2001 following a terror strike on the Indian parliament.
It notes that the Mumbai train bombings last year disrupted but did not derail the composite dialogue and that a mechanism for exchanging information on terrorist attacks has been established.
"Yet, the prospect of renewed tensions between the two remains despite these improved relations," the report warns.
"New Delhi's concerns about Pakistan's tolerance, at a minimum, (and) of terrorist attacks on Indian soil remain a dominant theme in relations, and risks derailing rapprochement."
In a separate assessment of the threat of a nuclear conflict in South Asia, the report notes that improved relations between India and Pakistan have decreased the possibility of such a disaster.
"Although both New Delhi and Islamabad are fielding a more mature strategic nuclear capability, they do not appear to be engaged in a Cold War-style arms race based on a quest for numerical superiority."