By Admin 
An important report of the famous American rating agency Moody’s has come out amid increasing tension between India and Pakistan. It states that if Indo-Pak tension increases further, it can have a serious effect on Pakistan’s economy and foreign exchange reserves (Forex Reserve). At the same time, it is not expected to have any major impact on India’s economy.
Pressure on Pakistan’s Forex Reserve
According to Moody’s, if the tension between India and Pakistan lasts, it may reduce Pakistan’s growth rate and will affect its financial stability. Especially the pressure on Pakistan’s Forex Reserve will increase, which are considered insufficient to repay foreign debt in the first years.
India will not have a big impact
Talking about India, Moody’s says that the economic relations between India and Pakistan are very limited. Less than 0.5 percent of India’s total exports go to Pakistan. Therefore, despite increasing tension, there is no possibility of any major setback in India’s economic activities. According to FY25 (April to January) data, India exported $ 447.65 million to Pakistan. At the same time, imports from Pakistan were only $ 0.42 million.
Pahalgam deteriorated after terrorist attack
On 22 April 2025, 26 tourists were killed in a terrorist attack in Pahalgam, Jammu and Kashmir, which was taken responsibility by the group TRF associated with Lashkar-e-Taiba. India has identified five terrorists involved in this attack, out of which three are said to be Pakistani citizens. Only then did the tension between the two countries intensified.
IMF funds may also be affected
Moody’s report also states that if the situation worsens, Pakistan may also have an impact on the help received from IMF or other international institutions. An IMF team is scheduled to meet Pakistan on 9 May, where a new funding of $ 1.3 billion and the current bailout package of $ 7 billion is to be reviewed. It is expected from India that it can demand reconsideration of funding being given to Pakistan from IMF and other global agencies.
What is the effect on India’s economy?
The report states that if the situation worsens, India may have to increase defense spending, which may increase fiscal deficit and slow the pace of fiscal improvement. But overall, the Indian economy will remain strong.
What does Moody’s rating say?
Pakistan’s rating-CAA2 is, it is considered very weak. That is, the risk of default is high. Whereas, India’s rating is- Baa3. This investment is considered to be the lowest range of grade, but stable. That is, there is no major threat to India’s economy in the increasing tension between Indo-Pak, but this phase can be very difficult for Pakistan.
Also read: India made its vault with gold, RBI bought 57 tonnes of gold in just 2025