Add the oil to a medium sized frying pan. Heat oil on medium-high heat. Stir in the spices, chili paste and cashew nut paste. Stir frequently for about 1 minute, just to allow spices to become fragrant.
Add the onions. Continue stirring occasionally for about 5 minutes.
Add the chicken pieces. Stir to coat pieces with spice mixture.
Add the 2 cups of water. Bring to a boil and reduce to simmer.
After 15 minutes, add the cut potatoes and quartered tomatoes. Simmer for another 10 minutes. Check the seasonings.
Add salt and sugar. Add the coconut milk. Simmer for another 10 minutes. Serve over cooked basmati rice.