India’s foreign policy has long been anchored in strategic autonomy, a principle that prioritizes independent decision-making and resists external interference in its affairs, particularly in its tense relationship with Pakistan.
However, recent events—namely the International Monetary Fund’s (IMF) approval of a $1 billion loan tranche to Pakistan despite India’s objections, and the United States’ announcement of a ceasefire between the two nations—represent a significant diplomatic setback for New Delhi.
These developments undermine India’s regional influence, dilute its stance on terrorism, and signal a troubling precedent for foreign intervention in South Asian geopolitics. At a time when India aspires to global leadership, this erosion of agency demands urgent introspection.
The IMF’s decision to disburse $1 billion to Pakistan on May 9, 2025, as part of a $7 billion bailout package, came despite India’s vocal concerns about the potential misuse of funds for state-sponsored terrorism.
India’s Foreign Secretary Vikram Misri, speaking ahead of the IMF board meeting, emphasized Pakistan’s poor track record with previous loans and alleged that financial support indirectly enables groups like Lashkar-e-Taiba and Jaish-e-Mohammed.
India’s abstention from the vote and its call for a broader review of IMF lending to Pakistan were brushed aside, with the IMF acknowledging India’s statements but proceeding regardless.
This outcome exposes the limits of India’s economic and diplomatic clout within multilateral institutions, where the United States, the IMF’s largest contributor, holds disproportionate sway.
The timing of the loan approval, coinciding with escalating tensions following the April 2025 Pahalgam terrorist attack that killed 26 tourists, amplifies the setback.
India’s $3.9 trillion economy dwarfs Pakistan’s $340 billion GDP, and New Delhi has leveraged trade blockades and treaty suspensions to isolate Islamabad economically. Yet, the IMF’s decision provides Pakistan a financial lifeline, easing its debt crisis and bolstering its capacity to sustain military and intelligence operations.
This perception—that Pakistan secured both funds and a reprieve through external mediation—undermines India’s narrative of holding Pakistan accountable for cross-border terrorism.
Equally concerning is the U.S.’s role in announcing the India-Pakistan ceasefire on May 10, 2025, following four days of intense military exchanges.
U.S. President Donald Trump’s Truth Social post claimed credit for brokering a “full and immediate ceasefire” after a “long night of talks,” a narrative echoed by Secretary of State Marco Rubio and Vice President J.D. Vance.
India, however, insists the agreement was reached directly between the Directors General of Military Operations, dismissing foreign mediation. External Affairs Minister S. Jaishankar reiterated India’s firm stance on terrorism, yet the U.S.’s high-profile announcement has muddied the waters, projecting Washington as a pivotal arbiter in South Asia.
This intervention marks a departure from India’s long-standing position that its disputes with Pakistan, particularly over Kashmir, are bilateral matters. Since the 1971 war, India has resisted third-party involvement, viewing it as a dilution of sovereignty.
The U.S.’s public claim of mediation, even if overstated, shifts global perceptions, casting India as a party reliant on external pressure to manage its neighbor. Pakistan’s Foreign Minister Ishaq Dar, claiming involvement of “three dozen countries,” further amplifies this narrative, positioning the ceasefire as a multilateral triumph rather than a bilateral necessity.
For India, which has cultivated an image of regional dominance, this portrayal is a diplomatic embarrassment.
The ceasefire itself, while halting the worst fighting in decades, is fragile, with violations reported hours after its 5 p.m. implementation on May 10.
India accused Pakistan of breaching the agreement, citing drone incursions and explosions in Srinagar and Jammu. Foreign Secretary Misri confirmed retaliatory measures, signaling that India’s conditional ceasefire does not soften its diplomatic measures, such as the suspension of the Indus Water Treaty.
However, the U.S.’s premature announcement and Pakistan’s subsequent violations weaken India’s ability to control the narrative. The international community, including Saudi Arabia and the UK, has welcomed the ceasefire, urging lasting peace, but this global chorus risks pressuring India into concessions that compromise its security imperatives.
The broader geopolitical context exacerbates India’s predicament. The U.S., navigating its own priorities—China tariffs, Middle East tensions—sees South Asia as a secondary theater.
By facilitating the IMF loan and ceasefire, Washington secures leverage over Pakistan, a key player in Afghanistan and counterterrorism, while signaling to India its indispensability as a mediator.
This dynamic places India in a reactive position, forced to balance its strategic partnership with the U.S. against its need for autonomy. China, Pakistan’s all-weather ally, benefits indirectly, as a stabilized Pakistan strengthens Beijing’s regional influence through initiatives like the China-Pakistan Economic Corridor.
India’s failure to block the IMF loan highlights structural challenges in global financial governance. The IMF’s apolitical mandate prioritizes economic stabilization over security concerns, ignoring India’s evidence of Pakistan’s misuse of funds.
This disconnect frustrates India’s efforts to align multilateral institutions with its counterterrorism agenda. Moreover, India’s economic rise has not yet translated into decisive influence within the IMF, where voting power remains skewed toward Western powers.
New Delhi’s push for reforms in global governance, a cornerstone of its G20 presidency, faces a reality check in such moments.
The domestic fallout is equally significant. India’s public, united after the Pahalgam attack, expects a resolute response to Pakistan’s provocations.
The perception of U.S. interference and the IMF’s leniency risks fueling skepticism about the government’s ability to project strength.
Opposition parties may seize on this to question India’s foreign policy, while nationalist sentiment decries the ceasefire as a concession. The government must navigate this tightrope, maintaining public support while engaging in planned talks with Pakistan on May 12.
To reclaim its diplomatic edge, India must act decisively. Strengthening bilateral mechanisms, such as the SAARC framework, could reduce reliance on external mediators. Investing in soft power—cultural exchanges, people-to-people ties—could counter Pakistan’s narrative of victimhood.
At the IMF, India should rally like-minded nations to condition future loans on verifiable reforms, including curbs on military spending.
Domestically, transparent communication about the ceasefire’s conditional nature can mitigate perceptions of weakness.
India’s aspiration to be a global power hinges on its ability to shape outcomes in its backyard.
The IMF’s loan to Pakistan and the U.S.’s ceasefire announcement expose vulnerabilities in this ambition. They signal that India’s voice, while growing, is not yet commanding enough to override Western priorities or Pakistan’s maneuvering.
New Delhi must recalibrate, doubling down on strategic autonomy to ensure that its disputes with Pakistan remain its own to resolve. Failure to do so risks ceding ground in a region where India’s leadership is non-negotiable.