I have always though that being chubby is a sign of prosperity!

It is indeed a sign of affluence. It signifies that you have the means to eat well and does not signify good health! Two-thirds of USA is overweight compared to much lesser in other countries which is linked to economic prosperity but the country has classified obesity a disease.

What are the dangers of obesity?

A large number of physical and mental conditions have been associated with obesity. Health consequences can be categorized by the effects of increased fat mass (osteoarthritis, obstructive sleep apnea, social stigmatization) or by the increased number of fat cells(diabetes, cancer, cardiovascular disease, non-alcoholic fatty liver disease)

How does being fat cause diabetes?

Increases in body fat alter the body's response to insulin, potentially leading to insulin resistance. Excess weight is behind 64% of cases of diabetes in men and 77% in women

But my recent Lipid Profile is within normal limits!

Lipid profile measures the blood levels of your lipids (Total cholesterol, good cholesterol and bad cholesterol etc). Obesity, however, is an independent risk factor for diabetes, high blood pressure, cardiac diseases and all other diseases mentioned above. Obesity is detected by your weight to height and therefore does not correlate with your lipid profile results. Though it is usual to have high blood lipid values in obesity, normal values are not rare and therefore normal values should not deter you from losing weight.