On May 6, 2025, tensions between India and Pakistan escalated dramatically as Pakistan placed its military on high alert along its eastern borders, anticipating a potential strike from India. Reports indicate that air defenses have been activated, military equipment repositioned, and drills conducted to signal readiness for any conflict. The heightened state of alert comes in the wake of a terrorist attack in Pahalgam, Jammu and Kashmir, that left 26 tourists dead on April 22, 2025, perpetrated by a group linked to the militant organization Lashkar-e-Taiba.
In an unusual twist, analysts warn that Pakistan may be vulnerable to a response from an unexpected direction, particularly from its western border with Afghanistan, which remains less fortified than its eastern front. Historically, Pakistan's military focus has centered on India, but the evolving geopolitical landscape suggests that threats could arise from multiple fronts.
India's military presence in Tajikistan, particularly at the Gissar Military Aerodrome—also known as the Ayni airbase—has been a significant strategic asset since the 1990s. Established during Afghanistan's civil war, the base was upgraded following the 9/11 attacks to enhance India’s operational capabilities. This airbase, located approximately 600 kilometers from Pakistan-occupied Kashmir, has been utilized for various military operations, including the evacuation of Indian nationals during the U.S. withdrawal from Afghanistan in August 2021.
According to reports, Indian Air Force C-17 and C-130 J transport aircraft operated from Ayni to facilitate the evacuation of 87 Indians from Kabul to Tajikistan. The strategic positioning of this base could compel Pakistan to stretch its air defense resources, potentially weakening its defenses along the critical Line of Control and International Border with India.
As the situation intensifies, Pakistan's economy is facing dire challenges. With inflation soaring near 30 percent and a staggering debt of 21.15 lakh crore rupees, the economic outlook appears bleak. Moody's Investors Service has indicated that while India’s economy is unlikely to suffer major disruptions from the rising tensions, Pakistan's economic stability is at significant risk. The agency noted that prolonged conflict could hamper Pakistan's fiscal consolidation efforts and impede its progress toward macroeconomic stability.
Moody's report highlighted that the ongoing geopolitical tensions could adversely affect Pakistan's foreign exchange reserves, which are already under pressure. The agency pointed out that a sustained escalation in hostilities with India would weigh heavily on Pakistan’s growth and complicate the government's efforts to stabilize its economy. In contrast, India is projected to achieve a GDP growth rate of 6.5% in the fiscal year 2024-25, bolstered by strong public sector investment and consumer demand.
India's economic resilience is further underscored by its minimal economic ties with Pakistan, which accounted for less than 0.5% of India's total exports in 2024. For the fiscal year 2024-25, India’s exports to Pakistan were recorded at $447.65 million, while imports stood at a mere $0.42 million. This economic disconnect suggests that India's economic activity is insulated from the fallout of rising tensions.
In the wake of the Pahalgam attack, India has taken decisive actions, including suspending the 1960 Indus Water Treaty, closing airspace, revoking visas for Pakistani citizens, and imposing a complete ban on imports from Pakistan. These measures reflect India's strategic shift in response to escalating threats, with fears that Pakistan may resort to military action.
As of May 6, 2025, the Jammu and Kashmir police have launched a massive anti-terror operation in the region, resulting in numerous arrests as they seek to apprehend the terrorists responsible for the Pahalgam attack. The police have identified five suspects, three of whom are believed to be Pakistani nationals, yet they remain at large.
In a broader context, the International Monetary Fund (IMF) is scheduled to meet with Pakistani officials on May 9, 2025, to discuss a potential $1.3 billion funding under its climate resilience loan program, alongside evaluating an ongoing $7 billion bailout package. However, the geopolitical climate may complicate these discussions, as India is expected to urge global multilateral agencies, including the IMF, to reassess the funds and loans allocated to Pakistan.
Moody's current rating for Pakistan stands at Caa2, indicating a high risk of default due to poor debt quality, while India's rating is Baa3, marking it as the lowest investment-grade rating. The disparity in ratings reflects the stark contrast in economic stability between the two nations, further exacerbated by the recent surge in tensions.
As the situation unfolds, the international community watches closely, with the potential for conflict looming large. The interplay of military readiness, economic instability, and geopolitical maneuvering sets the stage for a critical juncture in South Asian relations. The coming days will be pivotal, as both nations navigate the delicate balance between military preparedness and economic viability amid rising tensions.
