(Adds new quotes from Pakistan PM, Afghan president) By Y.P. Rajesh NEW DELHI, April 3 (Reuters) - South Asian leaders urged a regional economic grouping to move from words to action on Tuesday saying it was yet to fulfil its promise to lift millions out of poverty in one of the world's poorest regions. Prime ministers and presidents from eight nations, representing some 1.5 billion people, also called for mutual trust and peace in a grouping that has been held hostage to the rivalry between two of its biggest members, India and Pakistan. Indian Prime Minister Manmohan Singh said there was "economic vibrancy and social change" in individual nations in a region growing at around 5 percent a year, and said it was time to work together to boost integration and hasten progress. "We must now make a break with the past and join hands to realise our shared destiny," Singh said at the opening of the 14th summit of the South Asian Association for Regional Cooperation, or SAARC. "The question before us is whether we will seize this unique opportunity that beckons," he said. "The time has come to move SAARC from a declaratory phase to action and implementation." The South Asian group was formed in 1985 and also includes Bangladesh, Bhutan, Maldives, Nepal and Sri Lanka. Afghanistan became the eighth member on Tuesday when SAARC was expanded for the first time. It aims to promote economic integration, free trade and communication and cultural links between member states who are home to about a fifth of humanity, hundreds of millions of whom live on less than a dollar a day. Progress, however, has been crippled by hostilities between India and Pakistan as well as domestic conflicts, political instability and regional disputes between the nations. A free trade system launched last year, one of the biggest ambitions of SAARC, has not been fully implemented due to differences between India and Pakistan. KASHMIR SOLUTION Singh said India, as the largest country in the region, would accept "asymmetrical responsibilities" and allow zero-duty access to its markets before the end of this year to the least developed SAARC nations and also lift trade barriers. Afghanistan's entry into the group is also expected to be handicapped as Pakistan does not allow India to ship goods to Kabul by land through its territory. Afghan President Hamid Karzai, without naming Pakistan, called for the lifting of barriers "that inhibit the movement of people and goods between our countries". "Particular attention should also be directed to landlocked members ... we must not allow narrowly defined interests to trump the benefits of free-flowing trade in the region," he said. Pakistan is reluctant to sanction stronger trade ties with India until the rivals first resolve their political disputes, including the long-running Kashmir row. As a result, SAARC has largely been limited to creating development funds, opening disaster management centres and universities, and organising cultural exchanges and car rallies. Pakistani Prime Minister Shaukat Aziz said South Asia was mired in conflict management which was a drain on resources and prevented SAARC from achieving its aims. "We need to ask ourselves as to how relevant is SAARC to our people? How has it impacted their lives?" Aziz said. "These are some challenging questions that we ... must answer. They can no longer be ignored or denied." Aziz said members needed to resolve disputes through dialogue and compromise, build trust and economic inter-dependencies and lift barriers to free trade. India and Pakistan were making progress on resolving Kashmir and various options had been suggested, Aziz later told a news conference without elaborating. "But it is a bit of a journey. Some of us may say that things should happen overnight. As you know, in reality things do take time," he said. (Additional reporting by Kamil Zaheer)
