The Aakhya Weekly #144 | India’s Suspension of the Indus Waters Treaty: A Strategic Response to Cross-Border Terrorism

Apr 25, 2025

In Focus: Suspension of the IWT and Its Implications for Pakistan

[Second in a 3-Part Series on the Indus Waters Treaty, of 1960]

The Indus Waters Treaty (IWT) is back in conversation, following one of the worst terror attacks targeting civilians on Indian soil since 26/11 in Mumbai in 2008. Twenty-six people died, and several others were injured, when terrorists linked to The Resistance Front (TRF), an offshoot of the Pakistan-backed, UN-designated terror group Lashkar-e-Taiba, attacked tourists and families vacationing in the Baisaran meadows of Pahalgam, Jammu and Kashmir, on April 22.

The timing of the attack is conspicuous, given that it has come during Prime Minister Narendra Modi’s state visit to Saudi Arabia, and the US Vice President J D Vance’s 4-day visit to India. India is viewing this as a declaration of intent by the Pakistan Military top brass, an assertion of Pakistan’s position vis-a-vis Jammu & Kashmir, given the growing tourist footfall and Indian claims of a return to normalcy in the valley after decades of insurgency and violence.

Evolving Situation

PM Modi cut short his state visit, returning home to review the security situation and pursue retaliation measures in response to the attack. While strategic thinkers argue that India is exploring military options to bring the perpetrators to justice, several initial steps were announced following the Cabinet Committee on Security’s review meeting. During the press briefing, Vikram Misri, India’s Foreign Secretary, announced the temporary suspension of the IWT, revocation of Indian visas for Pakistani nationals, annulment of military attache appointments at the High Commission of Pakistan, downsizing diplomatic representation, withdrawal of Indian diplomats, closure of the Wagah-Attari border for trade and travel, among other actions.

On IWT, the Foreign Secretary said,

“The Indus Waters Treaty of 1960 will be held in abeyance with immediate effect, until Pakistan credibly and irrevocably abjures its support for cross-border terrorism”.

India’s decision to suspend the Indus Waters Treaty (IWT) is rooted in its strategic calculus to impose asymmetric costs on Pakistan for its continued patronage of cross-border terrorism. The Pahalgam attack, which targeted civilians during high-profile diplomatic engagements, underscores, in India’s view, Pakistan’s intent to destabilise Jammu & Kashmir.

Strategic Rationale Behind IWT Suspension

The World Bank-brokered Indus Waters Treaty, 1960, has been a bone of contention between India and Pakistan in recent decades. On countless occasions, India expressed intent to renegotiate and review the provisions, suggesting that several aspects of the treaty remain unfavourable to Indian interests and concerns. The previous piece in the IWT series of the Aakhya Weekly explored the context behind India’s insistence on renegotiation, talking points, and arguments about India’s withdrawal.

By leveraging the IWT, India is signalling its readiness to recalibrate bilateral engagements beyond military or diplomatic reprisals, targeting Pakistan’s economic vulnerabilities. The IWT’s suspension allows India to exercise its rights as an upper riparian state more assertively. By making IWT’s resumption contingent on Pakistan’s “credible and irrevocable” renunciation of terrorism, the MEA craftily aligned the move with India’s broader policy of linking Pakistan’s behaviour to shared resources, a tactic previously hinted at after the Uri and Pulwama attacks but now operationalised with greater resolve. In all likelihood, it pushes Pakistan into a corner, given the high stakes of water-related issues impacting Pakistan’s future.

Sociopolitical and Socioeconomic Impact

Pakistan’s economy, already crippled by a 60% debt-to-GDP ratio and a circular debt exceeding PKR 5.4 trillion in its energy sector, faces existential threats from the IWT suspension. The treaty governs 80% of Pakistan’s surface water, critical for irrigating 90% of its agricultural land. Punjabi agrarian society, which contributes over 60% of Pakistan’s wheat and significant shares of rice and sugarcane, is particularly vulnerable. Reduced water flows could slash crop yields, escalate food prices, and exacerbate rural unemployment—a dire scenario for a province grappling with political unrest. Similarly, hydropower accounts for 25% of Pakistan’s electricity (10,681 MW), relying on uninterrupted flows from the Indus, Jhelum, and Chenab. Several existing hydro projects and dams in Pakistan lack sufficient storage capacity and depend on India’s compliance with IWT-mandated data sharing and flow restrictions. Suspension jeopardises Pakistan’s Indicative Generation Capacity Expansion Plan (IGCEP), which aims to boost renewable energy to 62% by 2031. With coal imports costing $1.5 billion annually, energy shortages could further strain Pakistan’s fiscal stability.

The forecast for the most crucial region for the Pakistani establishment, i.e. Punjab, could be even more dire. Punjab’s agrarian economy, the backbone of Pakistan’s food security, faces collapse if water flows diminish. The province’s 50 million smallholder farmers, operating on marginal profits, lack the resilience to absorb erratic water supply. Moreover, a gradual decline in river water flows and climate-linked challenges like peak summers and low rainfall have already exacerbated the situation. If India chooses to incrementally impose costs on Pakistan through diversion of waters and IWT’s long-term suspension, the Pakistani State risks catalysing unrest among Punjab’s rural population, which forms the voter base for parties like the Pakistan Muslim League-Nawaz (PML-N). Historically, water scarcity has fuelled inter-provincial disputes, notably between Punjab and Sindh. By widening these faultlines, India’s move could destabilise the fragile coalition government in Islamabad, which relies on Punjab’s political dominance.

Implications for the Pakistan Army

The Pakistan Army, which derives considerable influence from its landholdings and agricultural investments in Punjab, may face backlash from disenfranchised farmers, challenging its “guardian” narrative. It is, therefore, understandable why it is an existential threat to Pakistan’s current quasi-military dispensation. The Pakistan Army’s hegemony rests on the level of control it exercises over national security and economic assets, including agricultural land and hydro-infrastructure.

Water scarcity directly imperils its corporate interests, such as the vast farms operated by the Fauji Foundation and Frontier Works Organisation. Additionally, the Army’s legitimacy as a stabilising force is tied to its ability to mitigate crises—a role undermined by the IWT suspension. The military’s failure to curb the alleged cross-border terrorism, despite India’s warnings, has now invited non-kinetic retaliation that could strike Pakistan’s economic core. In the medium to long term, it weakens the Army’s bargaining position in domestic politics and exposes its limited capacity to counter India’s manoeuvres.

Legal & Geopolitical Considerations and India’s Preparedness

Image Source: Wikimedia Commons

Over the past decade, India has strategically invested in infrastructure to leverage its upper riparian advantage. This indicates India’s calculated preparations, exemplified by the 330 MW Kishenganga and 850 MW Ratle hydroelectric projects on the Jhelum and Chenab, respectively. India has also accelerated the construction of storage facilities on the western rivers, including the Sawalkot and Pakal Dul dams, enhancing its capacity to regulate flows. These projects, compliant with IWT provisions, incorporate capabilities like low-level spillways for sediment flushing, which can now be operated without treaty constraints to maximise water retention. While immediate water diversion remains logistically challenging, these projects position India to exploit its riparian rights fully in the long term.

For decades now, India has lamented the shortcomings and inadequacies of the IWT. For instance, the IWT lacks explicit termination clauses but permits modifications under Article XII(3) if both parties agree. India’s suspension, framed as a response to Pakistan’s “material breach” of treaty obligations (Article XI), invokes the principle of rebus sic stantibus—fundamental change of circumstances, a stance India took, even in September 2024. New Delhi believes that Pakistan’s refusal to address cross-border terrorism and renegotiate terms, despite India’s requests in 2023 and 2024, strengthens its legal standing. While some experts argue that India could risk reputational damage as a “rules-based actor” on the international stage, Indian strategists increasingly think that this will be mitigated by Pakistan’s history of non-compliance with UN resolutions on terrorism. The World Bank, the treaty’s guarantor, faces a dilemma: intervening could politicise its role, while inaction undermines its dispute-resolution mechanisms.

An Uncertaint Future

India’s suspension of the IWT marks a paradigm shift in its Pakistan policy, transitioning from strategic restraint to coercive diplomacy. By targeting water resources, New Delhi exploits Pakistan’s economic fragility and internal fractures, particularly in Punjab. While the immediate hydrological impact may be limited, the psychological and political reverberations could compel Islamabad to reassess its sponsorship of terrorism. On the flip side, it is also possible for Pakistan to take it as a strategic red line, forcing it to move up the escalation ladder, gunning for an all-out war. However, its weak economy, tough socioeconomic compulsions and insurgencies towards its western borders complicate Pakistan’s decision-making to a large degree.

In India’s case, the decision to hold the IWT in abeyance underscores its capacity to wield non-military tools effectively, setting a precedent for future crises. As climate change and terrorism reshape South Asia’s geopolitics, the Indus Waters Treaty’s fate will remain inextricably linked to the region’s power dynamics, the longevity of the Pakistan Army’s control over the country, and its relative strength vis-a-vis its growing hegemonic rival, India.

A Few Good Reads

Amitabh Mattoo calls for a comprehensive political and security response to the Pahalgam terror attack to ensure lasting peace in Kashmir
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Tamali Sen Gupta argues that building a self-reliant semiconductor ecosystem is vital for India’s national security and strategic autonomy.
C. Raja Mohan underscores how Modi’s visit to Saudi Arabia signals a growing strategic partnership with a rapidly evolving Kingdom under Crown Prince Mohammed bin Salman.
Amit Kapoor emphasises that India's urban renewal requires active civic engagement alongside infrastructure development to effectively manage the projected urban population surge by 2036.

The Aakhya Weekly