An Indian film is to be directed by a Pakistani for the first time ever, deepening cultural links between the neighbours while their diplomats struggle to push forward a slow-moving peace process.

Pakistani actors and musicians have made a mark on Bollywood, but Omar Sharif will be the first to debut as a director in India's booming Hindi-language movie industry.

Indian films, which have been banned in Pakistan for 40 years, are hugely popular there, and a flourishing bootleg DVD industry and satellite television mean Pakistanis can now watch Bollywood movies at home.

Sharif will begin shooting for ‘Tum Mere Ho' (You Are Mine) - starring 1970s Bollywood heartthrob Rajesh Khanna and upcoming stars Ashmit Patel and Aarti Chhabria - from March 26 in the southern Indian city of Hyderabad.

The crew will then move on to Chicago, where most of the film will be set.

"It's a romantic comedy and I chose Omar to direct it because I have watched his films and they are great," the film's U.S.-based producer Masood Ali, also making his debut, told Reuters.

Sharif started as a stand-up comedian before moving into cinema.

"We are looking to release the Rs 120 million ($2.7 million) film around October or November before Diwali," Ali said.

Indian film industry officials welcomed the arrival of a Pakistani filmmaker, saying their neighbour had several promising directors who could better showcase their talents in India, whose films are increasingly gaining an international audience.

"More such cultural exchanges are required. Bollywood has always been very receptive to Pakistani artists," said Taran Adarsh, a leading trade analyst.

Last month, Pakistan allowed a special screening of ‘Mughal-e-Azam', an Indian period drama classic of Mughal emperors.

Officials there have indicated that other selected Bollywood films could be screened despite the long-time ban.

The two countries began a peace process two years ago in a bid to end decades of animosity that have seen them fight three wars since both gained independence from British rule in 1947.

But while they have strengthened transport, cultural and sporting ties, and boosted commercial links, little progress has been made on resolving core disputes such as that over Kashmir, a territory both claim.