In any war, there are significant losers beyond direct military defeat. This includes the civilian population, the nations involved in the conflict and even the victors, who suffer long-term consequences. In conventional terms, however, losers are defined as those who suffer the most significant military losses, human casualties, economic setbacks, or long-term damage due to the conflict. But given the nature of present wars, particularly among nuclear-armed rivals, where cutting edge technologies are involved and online information is manipulated on social media platforms to score tactical gains, there are no clear winners.
As the dust settles and the debris of war gets cleared, military historians and strategists are debating the conflicting victory claims of India and Pakistan. India says it neutralised over 100 terrorists in the initial air strike on nine terror launch pads, run by UN-sanctioned outfits like Lashkar-e-Taiba, Jaish-e-Mohammed and Hizbul Mujahideen, striking deep into Pakistan’s heartland, including Punjab province and Bahawalpur, once considered out of bounds even for US drones. The aerial blitz that smashed nine terror camps across the border was prompted by the dastardly 22 April attack by five armed terrorists belonging to a newly fangled terror group, The Resistance Front (TRF), who gunned down 25 Hindu tourists holidaying in the idyllic Baisaran meadow of Pahalgam, the tourist hub in Kashmir.
Brahmos deployment
Later, it fired deadly Brahmos missiles fitted on Sukhoi jets to destroy what, Indian officials claim, amounted to ‘20 per cent of Pakistan’s military infrastructure’. The “roar of Indian forces reached Rawalpindi, the very headquarters of the Pakistani army”, said Rajnath Singh, Union defence minister, referring to the Indian missile strikes on Nur Khan airbase. Vikram Misri, India’s Foreign Secretary, underlined that it was Pakistan’s own Director General of Military Operations who placed the call to New Delhi at 3.35 pm on 10 May, requesting a halt in hostilities. The ceasefire was mutually agreed upon and went into effect at 5 pm, with no concessions from India.
Pakistan, on the other hand, says that it brought down five of India’s fighter aircraft, including the prized Rafales, on the first night of the encounter. Later, in an address to his nation, Prime Minister Shehbaz Sharif said Pakistan’s armed forces had given a ‘professional and effective response’ to the Indian side. He credited the country’s armed forces for allegedly silencing Indian military assets, reducing airbases and ammunition depots to rubble – claims that Indian officials have firmly dismissed as fabrications.
In any war, the winners and losers are the arms manufacturers upon whom the warring nations are so dependant. And so, it was this time too. Pakistan extensively made use of Chinese weapons, fighter aircraft and air defence systems in its attempt to stop India’s strikes. In fact, the four-day war became a testing ground of the Chinese JF-17 and J-10C fighters, PL-15E air-to-air missiles and HQ-9 air defence system. China was swift to trumpet the superiority of its kit, sending the shares of some of its defence companies skyrocketing.
Despite the progress in indigenous weapons, India still depends heavily on arms imports, with Russia being its largest arms supplier, providing 36 per cent of imports. However, India is diversifying, buying more weapons from countries like France, Israel and the US, but the heavy equipment is still largely Russian. And so, the top-end S-400 air defence system (with an interception range of 300 km), Brahmos supersonic missiles and Sukhoi-30MKI aircraft (both being made under joint collaboration, but with a heavy Russian component) were the weapons of first choice to bring Pakistan to heel. In fact, Brahmos is already attracting global attention and inquiries, as is DRDO’s short-range Akash teer missile and D4 anti-drone system, which also played a key role in stopping Pakistani air strikes. Loitering munitions, or kamikaze drones, that are capable of surveillance and lethal penetration inside enemy territory to seek targets were also effectively used. One such drone, the SkyStriker, has been developed by Bengaluru-based Alpha Design (ADTL) in collaboration with Israel’s Elbit Systems.
In this connection, the performance of defence stocks in India and China tells an interesting tale. Post-ceasefire, Chinese defence stocks listed on the Shanghai Exchange are back to where they stood after the spectacular spurt, whereas Indian stocks have moved up (see graph: On strong footing) following reports that Operation Sindoor was a success powered partly also by home-grown technologies and weapons.
Retaliatory strikes
Officially, New Delhi has maintained that its actions were focussed, measured and non-escalatory. No military establishments were targeted in the first strike. It was only later when Pakistan sent drones and missiles into Indian territory that India began the retaliatory strikes, first on radar installations in Lahore and Gujaranwala and later on airbases spread across the country.
What led to the early and sudden cessation of war? Was it American intervention and the fear of ‘dangerous escalation’, as US President Donald Trump and his aides would have us believe? Or, is it just that people the world over are fed up of war, as most Europeans are of the Russia-Ukraine slugfest, which is dragging on endlessly or the Middle East countries are of the now one-sided Israel-Hamas conflict? Clearly, a combination of factors led to Pakistan’s call for ceasefire – international mediation and pressure, military setbacks to Pakistan, including India’s effective air defence that effectively neutralised their drones and missiles and Islamabad’s need to stabilise its economy during IMF negotiations. Though underplayed, economic pressures too played a major role.
Economic pressures
As war clouds hovered over the subcontinent, the growing assessment, both in New Delhi and Islamabad, was that continued conflict and tensions could dent India’s growth and cripple Pakistan’s fragile economy, dwarfing any tactical gains claimed by either side. The stakes were higher for India, one of the world’s fastest-growing large economies which has set itself a target of $5 trillion GDP by 2028 and of becoming a developed nation by 2047. “India has a lot at stake if any escalation on the border with Pakistan goes out of control and leads to a broader conflict,” said Abhishek Gupta of Bloomberg Economics. “That may dent investors’ confidence in India as a safe haven from Trump’s tariffs, while capacity constraints at the political level may shift the focus away from the economy.”
India has just inked a free trade agreement with the UK and is on its way to seal a similar deal with the US. It is hoping to carve out a bigger share of global manufacturing by attracting companies from China. Conflict creates uncertainty and risk, making countries less appealing to investors. Currency traders had started to hedge against greater volatility in both the Indian rupee and the Pakistani rupee. Bond markets were showing early signs of pricing in geopolitical risk premiums.
As it happens, both India and Pakistan had unleashed diplomatic moves targeting each other’s economies. Days before launching the military operation, India had announced a flurry of measures against Pakistan, including suspending the Indus Waters Treaty (IWT), halting most visas and stopping all trade. In response, Islamabad announced suspension of visas for Indians, a trade ban and the closure of its airspace to Indian flights. None of these punitive measures have been reversed by both countries so far. The move on trade and visas was not that significant, as most trade with Pakistan happens through a third country (the UAE). As for visas, not many Indians travel to Pakistan these days.
River waters as a weapon
The IWT, signed in 1960 and brokered by the World Bank, governs water sharing of six rivers in the Indus basin between the two countries. It has survived two wars between the countries and was held up as an example of trans-boundary water management, until the suspension late last month.
Shehbaz Sharif had earlier said that he believed the water issue with India would be resolved through peaceful negotiations. Pakistan depends heavily on these rivers for agriculture and civilian water supply. “Water cannot be weaponised,” Pakistan’s Finance Minister Muhammad Aurangzeb told Reuters news agency, adding that “unilateral withdrawal has no legal basis”. India, on the other hand, believes that ‘blood cannot mix with water’, implying that the IWT and encouragement to terrorism by Pakistan cannot go hand in hand.
Experts say it’s nearly impossible for India to hold back tens of billions of cu m of water from the western rivers during high-flow periods. It lacks both the massive storage infrastructure and the extensive canals needed to divert such volumes. However, if India begins controlling the flow even with its existing and potential infrastructure, Pakistan could feel the impact during the dry season, which is already upon us. Soon after India suspended the IWT, Pakistan threatened to suspend the 1972 Simla Agreement, which established the Line of Control, or de facto border between the countries. However, it hasn’t suspended it so far.
Prominent Pakistanis admit that the suspension of the IWT due to protracted hostility and conflict with India posed significant risks for Pakistan’s labour-intensive agriculture sector. “India’s suspension of the IWT had sent a destabilising signal. Agriculture remains the backbone of Pakistan’s economy, employing nearly 40 per cent of its labour force. Combined with ongoing political instability and the lingering effects of the 2022 floods, the country is ill-prepared for another major shock. A single crisis could trigger economic collapse and mass suffering. For Islamabad, avoiding significant escalation could be a question of survival,” wrote Yousuf Nazar, former head of Citigroup’s emerging markets investments and a leading economic commentator of Pakistan, in an opinion piece in The Financial Times.
Impact less on India
In India, the assessment was that though its economic health could be dampened by military escalation, the impact would be less than what had happened in the past, because of its current robust economy. A JM Financial report said that while wars tend to strain national resources, at present, the economy is better positioned to absorb such shocks than it was at any other time during the past conflicts. This buffer is attributed to structural reforms, a more diversified industrial base and strong macroeconomic fundamentals that shield against any full-blown economic shock.
However, there would be pain points emanating from developments like the closure of Pakistan’s airspace to all Indian airlines. The move has already compelled Air India to make significant operational adjustments, particularly for its long-haul flights to North America and Canada. Flights that previously utilised direct routes over Pakistan were now re-routed southward over the Arabian Sea, necessitating additional fuel stops in Vienna, Austria. For instance, the Delhi to Chicago O’Hare route, which typically took about 14 hours, now extends beyond 19 hours, due to the detour and refuelling requirements. These extended flight durations not only increase fuel consumption but also complicate crew scheduling and aircraft utilisation. Air India estimates that these disruptions could result in additional operational costs amounting to about $600 million annually.
The closure prompted a reciprocal ban from India on Pakistani carriers, forced numerous international airlines to reroute, resulting in longer flight times, additional fuel stops and increased operational costs, impacts that may soon be reflected in ticket prices. Given the strategic location of both countries along key Europe-Asia flight corridors, the consequences of these closures reverberated across the global aviation network.
India has accused Pakistan of backing the TRF which is an offshoot of Lashkar-e-Taiba (LeT), a Pakistan-based UN-designated terrorist group. It is said that the TRF was strategically created to divert attention from LeT and other militant groups under Financial Action Task Force (FATF) scrutiny, to maintain plausible deniability for attacks in India after Pakistan’s inclusion on the FATF’s grey list in 2018.
The veracity of these claims apart, India again ran into obstacles in trying to outrightly convince the international community that Pakistan was behind the Pahalgam attacks. “The international community has always put the onus on India to prove, in each and every case, that not only did the terrorists come from Pakistan but that they were also sponsored by the Pakistani establishment. Such questions were raised even when India suffered a series of terror attacks from Pakistan, including the attacks in Mumbai in 2008, where one of the perpetrators, Ajmal Kasab, was caught and Pakistan’s direct complicity stood exposed. It was the same story when the Pahalgam terror attack happened in April this year. The international community kept asking India for proof and refused to demand accountability or action from Pakistan against its terrorists. They went one step further and asked both countries to ‘de-escalate’, as if India had escalated the situation,” says T.S. Tirumurti, India’s ex permanent representative to the UN.
West’s double standards?
Diplomats affirm that one can call it a weakness of Indian diplomacy, but the West’s double standards are all too obvious. “It is ironic that when non-state actors such as Hezbollah in Lebanon or Houthis in Yemen attack Israel, the country targeted by the latter and the US is Iran, since the default presumption is that these groups are its proxies. Whereas here, even though India has a neighbour training and sponsoring terrorists to cross into India through a shared physical border, the world refuses to make that presumption and continues to ask India for proof,” points out Tirumurti.
Hence, while Indian armed forces came out of the four-day war with flying colours, our diplomacy and intelligence gathering certainly didn’t. Shyam Saran, former Indian foreign secretary, said the episode was a setback for New Delhi’s efforts to deter countries from treating it and Pakistan as on a par, and relations with each as interlinked. “Over the last several years, we had managed to de-hyphenate India and Pakistan and not to be seen as the bad twins constantly fighting with each other,” Saran said. “That hyphenation is now back, whether you like it or not.”
However, domestically, Modi has appeared to have gained significantly. Given the chest thumping and surge of nationalistic fervour, most countrymen seem to be pleased about the outcome of Operation Sindoor (a reference to the vermillion that married Hindu women apply to their forehead) to destroy the terror launch pads inimical to India in Pakistan and Pakistan-administered Kashmir. The political fallout of this decisive action will be felt during the Bihar assembly election, reaping rich dividends for the Bharatiya Janata Party, which may now even think of dumping Nitish Kumar and go it alone.
Old red lines blurred
Some experts say the war has indeed decimated, potentially beyond repair, old red lines that had defined the tense relationship between the two estranged South Asian neighbours. “India and Pakistan have entered a phase of ‘armed coexistence’ with little room for diplomacy and a narrow margin for error, despite having a live and sensitive border,” says Praveen Donthi, senior analyst at the International Crisis Group. Unless chastened leaderships wake up, the situation does not bode well for either country or the region, because “even accidental triggers could escalate into a war-like situation with no guardrails in place”.
That apart, already, pertinent questions are being asked in the strategic community. How does one keep abreast of the latest strides in technology and ISR (intelligence, surveillance and reconnaissance), which hold the key to modern-day warfare, with China emerging as a leading player in these fields? Can the mere economic clout of a nation guarantee its military success? Can a nation subjugate its economic interests to military success? Will the 2025 war serve as the new baseline for India with its military responding (in the future) on a similar scale, perhaps even a little bit more? So, while there is something in the outcome of the war for our defence planners to gloat over, there are issues to ponder over and lessons to be learnt as well.
During the past few decades, there has been a series of intelligence failures compounded by an apparently frail vigil at the 3,323 km India-Pakistan border, which includes the 776-km Line of Control (LoC) that separates us from Pakistan-occupied Kashmir. Security experts believe that, if infiltration is nipped in the bud at the borders by making them impregnable, terrorism would die out.
Comparisons with Israel
However, those who cite the example of a hard security state like Israel should also recall what happened on 7 October 2023, when the militant group Hamas launched what would become the deadliest terrorist attack in that country’s history. The group sent several thousand rockets into Israel from Gaza, the Palestinian territory under Hamas control. Hamas soldiers, some on paragliders, also crossed the Gaza border into Israel where they killed nearly 1,200 people and kidnapped over 200 more, many of them civilians. The attack has been informally called “Israel’s 9x11.”
Besides, all the noise about India turning into another Israel to deal with the Pakistan question sounds hollow when one takes into account the geography of our sub-continent with an untrustworthy China looming over our northern borders, a recently politically metamorphosed Bangladesh on the east and an ever-hostile Pakistan on the west. Then there is the issue of size. Israel is a nation of only 10 million in an area of about 22,000 sq km, which makes it roughly the size of Manipur. India is 150 times its size, both in population and area.
Sure, one can learn from Israel, its modern innovation and handling of conflict. Israel is also high on competence and hard work, making it a start-up nation. But this did not happen overnight.
New experience for NextGen
For a new generation of Indians who had just heard stories about the 1971 war, the four-day confrontation was a new experience. In the border areas of Jammu & Kashmir, Punjab, Rajasthan and Gujarat, they watched in awe and terror, as drones and missiles let loose by Pakistan threatened to rain destruction on them from the skies and our agile air defence system took them down. War came to the safety of their homes and offices via television sets, laptops and mobile screens in other parts of the country. Most of them welcomed the ceasefire though some ultranationalists felt let down by the country’s leadership which had sufficiently ratcheted up the temperature.
There is a feeling that the government and our armed forces did well, given that Indian missiles were able to penetrate Chinese built air defences (AD) in Pakistan and hit targets 100 km off the international border. “IAF bypassed and jammed Pakistan’s Chinese-supplied AD systems, completing the mission in just 23 minutes and demonstrating India’s technological edge,” says a top government official. Jamming means disrupting or confusing enemy radar and communications, while ‘23 minutes’ is the time taken by the IAF and army – in the early hours of 7 May – to bomb nine terror camps in Pakistan and PoK, carefully selected, based on hard intelligence about their nefarious track record of perpetrating terror activities.
However, there is a section of world opinion which does not see us as outright heroes – and certainly not as victors in this conflict. Indeed, the balance of opinion internationally is that nobody won the war, it was a stalemate. This is because the world today is much more international than it used to be. Information and opinion are both now disseminated so rapidly that it is much harder to influence, let alone control, the narrative. Perhaps that is where India needs to catch up with Pakistan.
So, when Pakistan trumpeted successes in the skies, claiming its pilots shot down Indian fighter jets in aerial battles, there were several western takers for it. India later released satellite images showing serious damage to military bases, air strips and radar stations caused by massive Indian airstrikes to counter Pakistan’s PR offensive. Claims and counter-claims flew back and forth. But by that time the war was over.
US claims
The aftermath of the war saw a lot of confusion swirling around. The US took sizeable credit for brokering the ceasefire. Marco Rubio, US secretary of state, and J.D. Vance, vice-president, were reported to have spent 48 hours embroiled in intense diplomatic negotiations with the two countries, finally convincing them to lay down arms. Vance had initially said the US would not interfere in the escalating hostilities between India and Pakistan, claiming it was ‘none of our business’. However, according to reports, their attitude shifted after concerns were raised by US intelligence that the conflict posed a risk of escalating into a full nuclear threat.
The reportedly pro-active role played by the US in the ceasefire, including phone calls made by Trump himself, seemed to have piqued the US President’s interest in the subcontinent. In a heady rush, he pledged to substantially increase trade with both India and Pakistan, if they called a ceasefire and also offered to mediate on the vexed Kashmir problem.
The Indian foreign office took some time to digest Trump’s attempt to wade into India-Pakistan politics and hostilities. It then rebutted his claims on mediation, Kashmir and trade one by one. Ruling out mediation, it said the only outstanding matter was the vacation of territory illegally occupied by Pakistan. As for trade, it had never come up for discussions with the US in the context of ending the war. It also underlined that India would not give in to ‘nuclear blackmail’ and reinforced the point that it was Pakistan which reached out for pausing military action.
Economic fallout
New Delhi was aware that the fallout of prolonged war would be felt on the economy. Led by the finance ministry, various ministries had begun making an assessment of the impact and also drawing up contingency plans. A similar exercise was said to be on in Islamabad. The stock markets, an indicator of the economy, sank precipitously both in Mumbai and Karachi at the onset of war – and rose equally dramatically when ceasefire was called.
The closest benchmark of how much war would have cost is the Kargil conflict in 2002, where India reportedly spent Rs1,460 crore per day, while Pakistan spent close to Rs370 crore per day. The cost would have been several times higher today in view of the fact that more expensive military platforms were now being deployed.
While India’s handsome foreign exchange reserves of over $650 billion could have helped cushion against a rise in military costs, the shocks to the stock market in case of potential stock market outflows in case of a full-fledged war and the possibility of a wartime cess or surcharge on tax-paying individuals, would have had a domino effect. All of this is already visible in a two-year high on volatility for the rupee that has one eye on trade tariff gyrations and the other on capital flight in the wake of an actual war.
Besides, if India were to boost its military spend, it would find itself in a tricky bind. The recent Union Budget was an admission that consumer spending needed urgent attention, and a tax stimulus was the answer. It is still unclear if there has been a meaningful improvement in eroding real purchasing power or in slowing personal loan growth. However, that tax stimulus has come with a downside; it means the government will lose R1 lakh crore annually, which in turn will impact its revenues and restrict its ability to spend.
Pakistan’s fragile state
As for Pakistan, the fragile state of its economy would have further come under severe strains in the event of an extended military conflict. The country is riddled with high foreign debt coupled with perilously low foreign exchange reserves and has been grappling with an almost perennial balance of payment crisis and high inflation in recent years. Islamabad’s external debt jumped to over $130 billion in 2024, over a fifth of which was estimated to be owned by its key ally China. Its forex reserves are pegged at a little over $15 billion, capable of paying for just about three months of imports. Reserves remain low relative to funding needs, with over $22 billion of public external debt maturing in 2024-25, including nearly $13 billion in bilateral deposits, as per Fitch.
IMF loan review
In the middle of the war, Pakistan was facing a critical review of its financing facilities at a board meeting of the International Monetary Fund (IMF) in Washington. Islamabad was seeking funds for its cash-strapped and debt-ridden economy. India was inclined to oppose the additional funding to Pakistan at the Board meeting, having already made its stance clear. A day before, it urged the IMF Board members to look ‘deep within’ and take facts into account before generously bailing out Pakistan.
With elevated debt levels and low reserve buffers, Islamabad had earlier managed to get a bailout package from the IMF in September 2024 with the approval of a $7-billion loan, following which its economy has shown some early signs of a recovery from the brink of a collapse. According to the latest South Asia Development Update released in April by the IMF, Pakistan’s economy has been recovering from a combination of natural disasters, external pressures and inflation. While inflation has slowed more quickly than expected along with strong imports of capital goods and high consumer confidence suggesting a pickup in private sector growth, the incoming data on economic activity have been weaker than expected. Economic growth of Pakistan is projected to rise to 3.1 per cent in 2025-26 from 2.7 per cent in 2024-25 (as also 2.5 per cent in 2023-24 and a contraction of 0.2 per cent in 2022-23).
IMF bailout
The ongoing 37-month long Extended Fund Facility programme of the IMF consists of six reviews over the span of the bailout, and the release of the next tranche of about $1 billion was to be contingent upon the success of the performance review. The IMF board met in the middle of the war to review the financing facilities extended to Pakistan, where it faced opposition from India for alleged diversion of funds towards ‘terror financing’. The IMF finally approved a $1 billion bailout to Pakistan.
As old IMF hands tell you, India’s decision to try to prevent the next tranche of the bailout to Islamabad was more about optics then, rather than a desire for any tangible outcome as the fund had limited ability to do something about the loan, and was ‘circumscribed by procedural and technical formalities’.
As one of the 25 members of the IMF board, India’s influence at the fund is limited. It represents a four-country group including Sri Lanka, Bangladesh and Bhutan. Pakistan is part of the Central Asia group, represented by Iran.
Unlike the United Nations’ one-country-one-vote system, the voting rights of IMF board members are based on a country’s economic size and its contributions – a system which has increasingly faced criticism for favouring richer Western countries over developing economies.
For example, the US has the biggest voting share (at 16.49 per cent), while India holds just 2.6 per cent. Besides, IMF rules do not allow for a vote against a proposal – board members either vote in favour or abstain – and the decisions are made by consensus on the board.
One wonders why India had to resort to such optics. A billion-dollar bailout would not have swung the tide for Pakistan. Just two days before Operation Sindoor, Moody’s Ratings cautioned that “sustained escalation in tensions with India would likely weigh on Pakistan’s growth and hamper the government’s ongoing fiscal consolidation, setting back Pakistan’s progress in achieving macro-economic stability”. The global ratings agency added that a persistent increase in tensions with India could also impair Pakistan’s access to external financing and pressure the country’s forex reserves, which remain “well below what is required to meet its external debt payment needs for the next few years”.
As for the impact on India, Moody’s said: “Comparatively, the macro-economic conditions in India would be stable, bolstered by moderating but still high levels of growth amid strong public investment and healthy private consumption. In a scenario of sustained escalation in localised tensions, we do not expect major disruptions to India’s economic activity because it has minimal economic relations with Pakistan”. The ratings agency, however, added that higher defence spending in such an eventuality would potentially weigh on New Delhi’s fiscal strength and slow its fiscal consolidation.
In such a fraught situation, a money-guzzling conflict with India should have been the last thing on a beleaguered Islamabad’s mind, as it would have to essentially fund any long-drawn-out conflict with borrowed money. It is possible, says an Indian diplomat who worked in Islamabad, that Shehbaz Sharif, who has the mindset of a businessman, decided to cut his country’s economic and military losses by suing for peace. The call by J.D. Vance, US Vice President, to the all-powerful Pakistan army chief General Asim Munir did the rest.
Hence, when restraint, not rhetoric, began shaping policies moving forward, there was a sigh of relief in many quarters. Failure to do so would have risked geopolitical turmoil, economic stagnation and hardship for millions. Home to a quarter of the world’s poorest people and more than 350 million illiterate adults, India and Pakistan just cannot afford prolonged strife. For their sake, for that of the sub-continent and of the world. Finally, wisdom prevailed over bluster.