PM Modi speaking at the launch of a trauma centre in Nepal on Tuesday.
As eight South Asian leaders meet in Kathmandu for a regional summit, the focus is on the tension between India and Pakistan.
At the South Asian Association for Regional Cooperation (SAARC) meeting, Prime Minister Narendra Modi is due to hold two-way talks with every country in the volatile region except Pakistan, as neither neighbour is ready to seek talks after 20 civilians were killed in recent fighting along the border in Kashmir.
"More often than not, India-Pakistan disputes have overshadowed the organization," Nepal's former prime minister, Baburam Bhattarai, wrote in the Republica newspaper. "It is now time for India to take the lead."
Despite a free trade pact since 2006, South Asian nations conduct only 5 per cent of their total trade with each other, and there are few transport and power links among them.
"My vision for our region is a dispute-free South Asia, where, instead of fighting each other, we jointly fight poverty," Pakistan's Prime Minister Nawaz Sharif said in a speech that acknowledged the grouping's sparse achievements.
But hopes for a meeting between Prime Ministers Modi and Sharif to restart talks faded after Sharif told reporters on his plane that "the ball is now in India's court".
India says Pakistan needs to commit to "meaningful dialogue" before they can meet at the summit, which opened on the anniversary of 2008 attacks by Pakistani militants on Mumbai that killed 166 people.
India would like to make SAARC a viable economic counterweight to China. Mr Modi hopes to build on goodwill he earned by inviting SAARC leaders, including Mr Sharif, to his inauguration six months ago.
But his ambition looked unlikely to gain traction in Kathmandu, with Indian officials on Tuesday saying Pakistan was blocking proposals to integrate energy grids and free up road and rail movement.
Such divisions and mistrust have helped China establish a strong foothold, building roads and ports in the region. The summit was held in a hall China built for Nepal.
Mr Modi has not welcomed Beijing's renewed suggestion, backed by Pakistan, for its status to be raised from "observer" in the grouping, where India is currently the major power.