India and Pakistan have had a tumultuous relationship for decades, marked by conflicts, border tensions, and diplomatic standoffs.
The latest in the row- the Pahalgam attack and the escalation that followed has further exposed the deep ideological and economic divide between the two countries – one that perpetuates the heinous crime of terrorism and the other that pushes back against it, one that’s surviving on bailouts and the other that is set to become the third largest economy in the world.
While military confrontations have often dominated the narrative, there is another powerful way India can weaken Pakistan — by targeting its economic vulnerabilities. Here’s how:
1. Leverage International Institutions to Cut Financial Aid
Pakistan is heavily dependent on international financial aid, particularly from institutions like the IMF, World Bank, and Asian Development Bank. India can leverage its diplomatic clout to persuade these institutions to either reduce or place stringent conditions on financial assistance to Pakistan.
Highlight Terror Financing: India can provide concrete evidence of Pakistan’s alleged support for terrorism, pressuring these bodies to impose sanctions or restrict funding.
Push for FATF Blacklisting: India should push aggressively for Pakistan’s re-entry in the Financial Action Task Force (FATF) grey list, restricting its access to international financial markets.
2. Woo Pakistan’s Trade Partners
Pakistan’s largest trading partners include China, the UAE, the USA, and Saudi Arabia. India can initiate high-level diplomatic talks to:
Encourage Export Reductions: Persuade these countries to cut down on exports to Pakistan or impose higher tariffs.
Offer Economic Incentives: Provide lucrative trade deals to Pakistan’s partners to divert trade away from Pakistan.
Highlight Unstable Economy: Point out Pakistan’s high external debt and rising inflation as deterrents for foreign investments.
3. Isolate Pakistan Economically in South Asia
India is the dominant economy in South Asia, and it can use this position to isolate Pakistan within regional trade bodies like SAARC and BIMSTEC.
Push for Trade Exclusion: Lobby for Pakistan’s exclusion from trade agreements under these bodies.
Enhance Regional Trade Ties: Strengthen ties with other SAARC countries like Nepal, Bangladesh, and Sri Lanka to reduce their economic dependence on Pakistan.
4. Control Water Resources Strategically
India has significant leverage over the Indus Waters Treaty, under which it controls water flowing into Pakistan. She has already suspended the agreement, now it’s the time to remain steadfast in her decision.
India’s restricting water flow to Pakistan will impact its agricultural output, thereby dealing a severe blow to the Pakistani economy.
5. Strategic Economic Alliances
India can strengthen its alliances with Pakistan’s creditors, particularly the UAE, Saudi Arabia, and China, to exert economic pressure:
Saudi and UAE Investments: India can offer profitable investment opportunities in infrastructure and tech to divert potential investments away from Pakistan.
Debt Diplomacy with China: India could subtly remind China of Pakistan’s mounting debt, discouraging further Chinese investments in CPEC (China-Pakistan Economic Corridor).
6. Control Remittances and Economic Sanctions
Pakistan receives substantial remittances from Gulf countries and the UK. India can engage in back-channel diplomacy to:
Impose Remittance Restrictions: Encourage Gulf nations to tighten visa rules for Pakistani workers.
Sanction-Based Pressure: Push for targeted economic sanctions against specific Pakistani companies or sectors involved in terror financing or anti-India activities.
7. Publicize Economic Instability
India can launch an international PR campaign to highlight Pakistan’s economic instability, focusing on:
Debt Crisis: Showcase its ballooning debt-to-GDP ratio and dependence on IMF bailouts.
Economic Mismanagement: Expose corruption and economic mismanagement to discourage foreign investments.
Regional Security Threats: Highlight the risks of investing in a politically unstable region, affecting investor confidence.
Conclusion
While military strategies are often seen as the primary means to counter Pakistan, economic measures can be equally, if not more, impactful. By leveraging international institutions, diplomatic pressure, and strategic economic alliances, India can systematically weaken Pakistan’s economic backbone without firing a single shot.
