Indiacators 16/05
Ceasefire, US trade
India-Pakistan
The White House brokered a hasty ceasefire between Pakistan and India, thankfully ending a spiralling conflict. The ceasefire, however, is not a return to the pre-Pahalgam status quo. For India, where memories of mid-century capitulations to foreign pressure still sting, any peace negotiations with Pakistan must be strictly bilateral. The fact that India agreed to a ceasefire under US pressure, following a nuclear threat by Pakistan was humiliating enough. A secure and lasting resolution to the recent conflict, let alone India and Pakistan’s terrible relationship, is as far away as ever.
The problem begins with the reasons behind the ceasefire. US media reported that the White House rang both sides and corralled India into peace negotiations (probably after a credible nuclear threat from Pakistan). What means they used to apply pressure are unknown, although the commerce minister will arrive in the US next week for trade negotiations. Trump later boasted of the mediation on Truth Social, causing a minor diplomatic spat with India, who felt he asserted an equivalence between Pakistan and India.
What matters now is where the conflict leaves India. New Delhi will hope that its rapid escalation and apparent air superiority (reporting and propaganda often elide during war), will deter Pakistan from future aggression. This would leave India a free hand to focus on conflict with China, who is the more powerful aggressor at the border. The problem is that one of the conflict’s most important and underemphasised outcomes, was Pakistan’s reliance on Chinese military tech. The challenges posed by China and Islamabad are connected.
The ceasefire between Islamabad and New Delhi, which according to Pakistani officials had been in the works for several days, was agreed to after a “hotline” message was sent from a top Pakistani military official to his Indian counterpart, India’s military said Sunday, offering new details about how the unexpected deal was struck.
Pakistan’s military confirmed Sunday that it reached out, but said it contacted intermediaries regarding a ceasefire with India. It did not specify which countries, although a Pakistani official involved in the talks told CNN it was the United States making the important calls Saturday.
During a call, held at 3:35 p.m. local time, a ceasefire agreement was reached, according to India’s director general of military operations, Lt Gen Rajiv Ghai. He said a further call would be held to “discuss the modalities that would enable the longevity” of the agreement. Pakistan has not confirmed whether or not a call was held, but the official involved in the diplomatic efforts said Pakistan had received unspecified “assurances” from the US that India would abide by the ceasefire.
2. How India and Pakistan pulled back from brink of war - FT
“India will feel vindicated in its belief that there is more room than previously thought to trade barbs under the nuclear shadow,” said Ankit Panda, a senior fellow at the Carnegie Endowment for International Peace in Washington. “Pakistan’s military will be content with its retaliation and walk away with a sense that deterrence was reestablished.”
However, analysts said that while both countries had delivered heavy blows, Washington’s diplomatic intervention to avert full-scale war had rankled India by bracketing the world’s largest democracy and fifth-biggest economy with what it sees as a terrorism-backing rogue state.
3. Operation Sindoor and South Asia’s Uncertain Future | Grand Tamasha - Carnegie Endowment
Note: Excellent timeline of the conflict 2:00-7:15.
April 22: Pahalgam attack kills 26, Hindus disproportionately targeted.
May 7: India targets anti-India military groups in 9 airstrikes. Not all the the
May 7: Pakistan airforce downs at least 1 (and likely more) Rafale jets.
May 7 (night): Pakistan drone attacks on western India fail.
May 8: India launches retaliatory drone attack, killing a civilian.
May 9-10: Pakistan targets western India again.
May 10: Both Indian and Pakistani airstrikes continue at a larger scale. Ballistic missile attacks begin. US starts to push for a ceasefire.
4. Interview: US claiming credit for ceasefire sets Indian foreign policy back by decades - Scroll
Note: Must read for a good overview of why US mediation rankles India.
On a more fundamental level, the conflict raises questions about the tug of war between India’s global aspirations and regional instabilities.
Last week’s tensions mark the worst period of hostility between India and Pakistan since the 1971 war – while the 1999 Kargil war had a higher number of fatalities, the scale of last week’s military operations was larger, as it extended beyond Kashmir into both countries’ heartlands. It also comes after China and India engaged in border clashes in 2020, the worst flare-up of border tensions between those two countries in more than four decades.
For Pakistan, the conflict may have partially revived the image of the military, which derives its legitimacy (and justification for an overwhelming presence in Pakistani politics) through its well-entrenched anti-India ideology.
The term of army chief Asim Munir has recently been extended from three to five years. Coupled with Munir’s hardline credentials – he is seen as Pakistan’s second Islamist army chief (after Zia ul Haq) – this further reduces the likelihood of a genuine reconciliation or rapprochement between both countries in the near future.
6. The Use of Drones Marks a New Phase in India-Pakistan Hostilities - ORF
7. The IMF’s uncomfortable balancing act in Pakistan - Indian Express
Pakistan’s location — bordering China, India, the Arabian Sea, and its proximity to Central Asia — makes it a prized pawn in great power politics. For China, it’s a gateway for trade and a pressure point on India, anchored by the China-Pakistan Economic Corridor (CPEC). For the US, despite its pivot to India, Pakistan remains a significant player due to its strategic position and nuclear capabilities.
China and the US enable Pakistan’s dysfunction for strategic gain — Beijing through investment, Washington through multilaterally backed liquidity, while Islamabad exploits its economic fragility as leverage. The current IMF bailout underscores how the international system continues to accommodate a geopolitically pivotal yet structurally fragile terror-breeding state.
Note: The IMF announced a long-awaited $2.4 billion bailout to Pakistan a day before the ceasefire was brokered, to India’s frustration.
8. India’s Warning to Pakistan - Project Syndicate
Note: The Indus Waters Treaty was agreed in a previous era, when India was far weaker than it is now. From an Indian perspective, Pakistan has abused the terms of the treaty, either by sponsoring terrorism in India, as a form of unconventional warfare, or by using an arbitration clause to dispute Indian projects on the Indus. The IWT’s suspension at the start of the conflict was among the strongest measures taken.
9. India and Pakistan: a conflict in the hands of two religious strongmen - FT
Note: Good read. Asim Munir, Pakistan’s army chief and strongest man, is a fervent religious nationalist. The article draws parallels between Munir and Modi.
10. Chinese Weapons Gain Credibility After Pakistan-India Conflict - Bloomberg
The recent conflict between India and Pakistan is prompting a reassessment of Chinese weapons, challenging long-held perceptions of their inferiority to Western arms and sparking concern in places wary of Beijing.
Pakistan hailed the use of its Chinese J-10Cs to shoot down five Indian fighters, including French-made Rafale aircraft, last week in response to Indian military strikes. Although the reports haven’t been confirmed, and India hasn’t commented, the jet’s maker saw its market capitalization soar by over 55 billion yuan ($7.6 billion), or more than a fourth, by the end of last week.
Note: The downing of five Indian jets by Chinese made aircraft has undermined widespread assumptions about their quality relative to western models.
11. India expels Pakistani High Commission official for espionage - Deccan Herald
12. ‘Blatant censorship at a critical time’: ‘The Wire’ says its website blocked by Centre - Scroll
Note: Mainstream media in India produced wall-to-wall coverage in support of Operation Sindoor. The Wire, one of the few opposition media outlets in India, had its website blocked. X also complied with a government order to block the accounts of several other news outlets.
Trade and business news
Trade negotiations between India and the US progress forwards. Whether Trump’s claim, that India will lift all tariffs is true, remains to be seen. Trump’s demand that Tim Cook increase production in the US instead of India is demonstrably unenforceable. A Foxconn joint-venture semiconductor plant was approved just this week for Uttar Pradesh.
13. Trump says India willing to charge 'no tariffs' on US goods - BBC
US President Donald Trump has said that India has offered to drop all tariffs on goods imported from his country. The Indian government has "offered us a deal where basically they are willing to literally charge us no tariff", Trump said at an event in Doha.
India and the US are currently in talks to negotiate a trade agreement. Delhi has not commented yet on the remarks. The BBC has reached out to India's commerce ministry for comment.According to Bloomberg, the US president also said he had told Apple CEO Tim Cook not to expand production in India. "I said I don't want you building in India," Bloomberg quoted Trump as saying about a conversation he said he had with Mr Cook. He added that Apple would be "upping their production in the United States".
14. India approves Foxconn-HCL semiconductor JV setup - Nikkei
15. India Trade Minister to Visit US this Week to Discuss Tariffs - Bloomberg
India’s Trade Minister Piyush Goyal is expected to travel to the US on May 17-20 to hold talks with Trump administration officials as New Delhi threatens to impose retaliatory tariffs on some American goods, a person familiar with the matter said.
Goyal is expected to meet US Trade Representative Jamieson Greer and Commerce Secretary Howard Lutnick for talks on a bilateral trade deal, the person said, asking not to be identified because the matter isn’t public.
Andy Mukherjee’s Bloomberg column covered a controversial decision by the Supreme Court, which ordered banks to return money they had received from an insolvent steel producer’s new owners to settle previous debts, four years after the original repayment. Underlying everything is India’s creaky repayment and liquidation system, in which three quarters of cases exceed the 270-day prescribed mark for resolution at a tribunal.
This could be a big problem. The 2016 reform of India’s debt resolution increased investor confidence by introducing mechanisms to extricate lenders from non-performing loans. For several years now, the proportion of non-performing loans fell If resolution for insolvency is taking years, and new investment is inconsistently slapped down by the Supreme Court, the system could be in as bad a state as ever.
16. India’s Insolvency Law Has Bankers Going Bald - Bloomberg
Now that New Delhi has nearly a decade of experience of operating a modern bankruptcy code, it should reevaluate it. The law needs to provide more certainty to outcomes. But any tweak must also take into account a business landscape that has evolved very differently from the rest of the world. Unlike the US, India has few executive-led corporations. Control of economic assets has passed from “managing agencies,” a 200-year-old British-era colonial invention, to so-called promoters, which are usually business families that do whatever they want with the help of cherrypicked boards, weak regulatory oversight, and other people’s money.
Genuine reform will mean ending this promoter raj, which will, in turn, involve an arduous overhaul of everything from the company law to the securities code. However, even that won’t be enough. The big leap in bankruptcy will require attention to the political economy.
17. Suzuki grew car exports from India by 18% to record 333,000 - Nikkei
18. Manufacturing-Led Export Strategies Still Make Sense - Project Syndicate
19. RBI reviews e-wallets of EV players after BluSmart goes bust - Economic Times
The Reserve Bank of India is scrutinizing some digital wallets associated with electric-vehicle players after the sudden collapse of the country’s largest all-EV taxi service left users unable to access money tied to their accounts, people familiar with the matter said.
The review of payment tools used in India’s fledgling EV ecosystem is a result of troubles faced by users of app-based ride-hailing service BluSmart’s digital wallet. The events triggered by fraud allegations against the company highlighted the lack of safeguards for users who load money into what’s known as closed-loop wallets to transact on apps, including EV-related services like booking rides or using a charging station.
The regulator has not taken a formal stance yet, but any move to bring app-specific wallets under tighter oversight could have broad implications for India’s digital economy, where platforms rely heavily on prepaid balances to build stickiness and drive repeat usage.
In other news
Operation against Naxalites ends
Note: A second ceasefire arose in India this week, this one involving an enormous 28000 soldier operation against Maoist insurgents in Chhattisgarh. Amit Shah has set a March 2026 deadline to end the insurgency in the region.
21. India: 60 Years of Maoist insurgency and its human cost - Deutsche Welle