Pakistan is considering upgrading the constitutional status of its northern Gilgit-Baltistan region, which is also claimed by India, in a bid to provide legal cover to a multi-billion-dollar Chinese investment plan, officials said Thursday.

The move could signal a historic shift in Pakistan's position on the future of the wider Kashmir region, observers have said, weeks after fragile peace talk efforts that received a boost after India's Prime Minister Narendra Modi visited Lahore in December.

The proposal would grant the mountainous region greater legislative powers and control of its revenue, as well as send two lawmakers to the federal parliament for the first time -- albeit as observers.

Islamabad has historically insisted the parts of Kashmir it controls are semi-autonomous and has not formally integrated them into the country, in line with its position that a referendum should be carried out across the whole of the region.

A top government official from Gilgit-Baltistan said the move was in response to concerns raised by Beijing about the China Pakistan Economic Corridor, an ambitious $46 billion infrastructure plan to link China's western city of Kashgar to the Pakistani port of Gwadar on the Arabian Sea.

"China cannot afford to invest billions of dollars on a road that passes through a disputed territory claimed both by India and Pakistan," the official, speaking on condition of anonymity, said.

The corridor plans have been strongly criticised by New Delhi, with India's Foreign Minister Sushma Swaraj in June calling the project "unacceptable" for crossing through Indian-claimed territory.

India and Pakistan have fought two full-scale wars over Kashmir since gaining independence from Britain in 1947 and any changes to the status quo could potentially prove a further setback to hopes for dialogue that were revived after Modi made the historic Lahore visit.

Those efforts were already seen as fragile following a deadly attack on an Indian air base near the Pakistan border Saturday that was followed by a 25-hour siege on an Indian consulate in Afghanistan on Monday.

- Integration and autonomy -

But according to Pakistani strategic analyst Ayesha Siddiqa, the move could also demonstrate Islamabad's desire to end the Kashmir conflict by formally absorbing the territory it controls -- and, by extension, recognising New Delhi's claims to parts of the region it controls, such as the Kashmir Valley.

"If we begin to absorb it so can India. It legitimises their absorption of the valley," she said.

Mohan Guruswamy, head of the New Delhi-based think tank Centre for Policy Alternatives said despite its avowed claim over G-B, the Indian government may not react strongly.

"There will be some noise in India but the country has never shown a political consensus to take back those areas from Pakistan," he said.

"This step is basically to formalise the incorporation of areas under Pakistani rule. Probably a good step as it may lead to the permanent settlement of the Kashmir issue with both countries content with what they currently have under their rule."

The G-B region's ambiguous legal status has long meant that it has relatively little say in its own affairs and was directly ruled from Islamabad, despite the pretence of autonomy.

Ibrahim Sanai, the region's information minister, told AFP: "Gilgit-Baltistan will be made an independent provisional province till the final decision on Kashmir issue.

But Amanullah Khan, chairman of the nationalist Gilgit-Baltistan Democratic Alliance, said Islamabad was attempting to pass legislation that would allow it to plunder the region's resources.

"The real motive behind the move is to provide a legal cover to the Pakistani plans of leasing out the region to China and selling its natural resources like gold and uranium," he told AFP.