Control of Pakistan’s water resources and the waging of “covert low intensity war” by proxy against Pakistan contributes to her paranoia and spurs her continuing nuclear build up. Think it through: is it in India’s national interest to agitate a paranoid, unstable, nuclear armed neighbor? And, from Pakistan’s perspective, was the Mumbai attack part of a legitimate response to India’s provocations?
What you see as Pakistani “paranoia” is very calculated Pakistani charade to not cooperate in WOT or extract a higher price from Washington for it. They play their “paranoia” card so that they can get Washington to put pressure on India to concede more. Thus they can milk US and also get away with murder. And the world can paint India as the culprit for Pakistan’s paranoia.
If Pakistan really desires peace its not a very difficult proposition. India with her economic growth has far more to lose in a conflict and more to gain from peace. That doesn’t mean India will sit quietly even after several 9/11 like provocations. India has a way of giving it back to Pakistan without lowering the nuclear threshold.