The problems of dealing with the rogue neighbour | Number Theory

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The brutal killing of 26 tourists in Pahalgam on Tuesday has once again raised the question of the optimal response to Pakistan-sponsored terrorism in Jammu & Kashmir . If resolution has become more difficult, it is also because India has pulled far of Pakistan in the past four decades while the latter has been caught in what can only be described as a self-destructive loop, thereby increasing its desperation. Here are four charts which explain the argument in detail.

Soldiers during a search operation around Baisaran meadow in the aftermath of the terror attack in Pahalgam. (AFP)

The problems of dealing with the rogue neighbour

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  Pakistan’s economic decline vis-à-vis India is recent

  India’s GDP and per capita GDP was eight and 1.4 times that of Pakistan in 2023, the latest year for which comparable data is available with the World Bank. It might seem obvious to think of India as a major economy and Pakistan almost a basket case. However, this was not always the case. Between 1960 and 1980s, India’s relative advantage with Pakistan in terms of size of GDP was actually narrowing. Pakistan’s per capita GDP was higher than India’s until 2010. On both these indicators, the inflexion point came around 1990 which is when India adopted large scale economic reforms but also started facing Pakistan sponsored militancy in Kashmir. Militancy in Kashmir has had its security and human costs, but it has not stopped India’s economic march.
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  What’s even worse than Pakistan’s GDP performance is its macroeconomic stability

  India having to ship gold from RBI’s vaults to London in 1991 to avoid a sovereign debt crisis is considered a watershed event in the country’s post-independence economic history. A comparison of two critical external stability indicators – external debt as share of gross national income (lower the better) and total reserves as a share of external debt (higher the better) – for India and Pakistan shows that the latter has been living through India’s 1991-like moment almost continuously. Pakistan is currently under a $7 billion IMF bailout programme. The economic indicators discussed so far mean that India has a much larger incentive to not do anything rash on the security front which could spook markets or worsen its economic performance.
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  Pakistan’s economic troubles have not prevented it from spending a lot on military

  In relative terms, both as a share of overall economy and government spending, Pakistan spends more on its military than India. For a country that is struggling on more than one economic front, cutting down on military spending would make sense. However, Pakistan’s political economy is one where the military, partly because of its deep links with the small national elite, and partly because of scaremongering , has disproportionate clout and takes precedence over larger national interest. To be sure, military spending in Pakistan seems to have come down shortly after it became a nuclear power following India’s 1998 Pokhran blasts. However, the fact that both India and Pakistan are nuclear powers and the latter outspends India (relative to the size of the economy) even in conventional military expenditure shows the relative priorities of the two countries.
• Pakistan’s sponsorship of terrorism is surprising because...

  While Pakistan has been actively sponsoring terrorism in India, especially but not just in Jammu and Kashmir, it has suffered more from terrorist violence if one were to make macabre comparisons such as deaths in terrorist incidents. Data from the South Asia Terrorism Portal shows that Pakistan lost 70,564 lives in terror related incidents between 2001 and 2025 (up to April 19). This number was 43,641 for India of which 19,588 were in Jammu & Kashmir. The number of civilians killed in these incidents during this period is 13,229 for India, 4,313 in Jammu & Kashmir in India and 22,024 in Pakistan. The long-term trajectory of terror in India has been declining while the situation has been far more volatile in Pakistan. Pakistan is a classic example of the theory that when a state starts preaching sectarian politics, there’s always the risk that this could percolate to non-state actors, resulting in loss of control of both the economy and national security.