Mr Sharif is the only leader missing from PM Modi's schedule today, say officials.
On the sixth anniversary of the 26/11 Mumbai attacks blamed on Pakistan-based terrorists, PM Modi this morning tweeted, "Today is a day to reaffirm our commitment to work together to combat the menace of terror & uproot it from the face of humankind."
PM Modi is expected to raise the attacks and the need to jointly fight terror in the region when he addresses SAARC or the South Asian Association for Regional Cooperation, a grouping that comprises Bangladesh, Bhutan, India, the Maldives, Nepal, Pakistan, Sri Lanka and Afghanistan.
Without referring to India, Mr Sharif, in his address, called for a "dispute free South Asia where instead of fighting each other, we fight disease and poverty."
Sources say PM Modi and Nawaz Sharif may chat informally at Nepal Prime Minister Sushil Koirala's banquet tonight and at a retreat for leaders on Thursday outside Kathmandu, but it is not clear what shape that will take.
In response, the Indian foreign ministry spokesperson Syed Akbaruddin said, "We have been shouting from rooftops that we are ready for meaningful dialogue but the emphasis is on meaningful, meaningful dialogue has a meaning in diplomacy. In Pakistan, they know it very clearly, what we mean by meaningful dialogue."
The stand-off has threatened to overtake the agenda of the summit, which works on consensus. Sources told NDTV that Pakistan is opposing India's suggestions that include greater connectivity in the region with easier travel and stronger power and railway links.
India said it wanted "concrete outcomes at SAARC, but one country said its internal processes were not ready".
In August, India called off talks with Pakistan over its envoy's meetings with Kashmiri separatists, just three months after PM Modi, in a surprise move, invited Mr Sharif to his swearing-in ceremony in Delhi.
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