As tensions escalate following India’s targeted military strikes under Operation Sindoor, the stark contrast in economic trajectories between India and Pakistan has come into sharp focus.

India is on track to become the third-largest economy in the world by 2025, with its GDP projected to rise to $4.187 trillion, overtaking Japan, according to the IMF’s World Economic Outlook report. In 2024, the World Bank pegged India’s GDP at $3.88 trillion, over ten times larger than Pakistan’s GDP, which stands at a meagre $0.37 trillion.

India also boasts a massive foreign exchange reserve of $688 billion, highlighting its economic resilience and global investor confidence. In contrast, Pakistan teeters on the brink of economic collapse, with forex reserves dwindling to $15 billion, and the country surviving on loans from the IMF and other multilateral institutions.

Once on a similar footing, Pakistan’s economy was buoyed in the early years after independence by U.S. aid and financial support from oil-rich Islamic nations. However, while India focused on democratic governance and development, Pakistan has suffered from a cycle of military coups, political instability, and a persistent focus on hostility with India, including the financing and support of terrorism.

This long-term strategy has now boomeranged, contributing to domestic unrest and bloody insurgencies in Balochistan and the North West Frontier Province. The cost of harbouring terrorism has not only isolated Pakistan internationally but also drained its already strained resources.

In 2023, Pakistan narrowly avoided sovereign default, receiving a $3 billion IMF bailout. Yet, the financial crisis continues, with Islamabad desperately seeking an additional $1.3 billion climate resilience loan.

On the other hand, India’s macroeconomic outlook remains stable, even amid the ongoing geopolitical tensions. According to global ratings agency Moody’s, India is likely to maintain economic stability thanks to strong public investment and resilient private consumption.

Moody’s warned that while rising tensions might push India’s defence spending higher and slow fiscal consolidation, the broader economic fundamentals remain intact. India’s minimal trade exposure to Pakistan—less than 0.5% of total exports—also insulates it from any significant economic fallout.

Meanwhile, for Pakistan, any sustained escalation could further derail its fragile economic recovery, impair access to foreign financing, and increase pressure on its low forex reserves, Moody’s noted.

As India moves toward economic superpower status, Pakistan faces a reckoning brought about by decades of internal mismanagement and external aggression.