As dwindling forex reserves, nationwide power outages, stampedes at state-run food distribution centres and a Pakistani rupee, which plunged nearly 50 per cent in a year to 260 to the US dollar on Monday, propels the neighbouring country towards being an international "basket case", Indian analysts believe there could be serious consequences for the region. Amid this economic crisis, the Shahbaz Sharif government will begin crucial negotiations with the Washington-based IMF (International Monetary Fund) for a bail-out package on Tuesday which may come with "tough and possibly politically risky" pre-conditions of austerity, feeding into a bigger political crisis, they said.
The risk for India would not only be instability in Pakistan with its fall-out of rising extremism in the region but also unpredictable actions which could include bids to divert domestic public attention by focussing on an external enemy.
"The current economic crisis is feeding into the ongoing political crisis (where the Imran Khan-led Pakistan Tehreek-I-Insaf party has dissolved two provincial assemblies to force fresh elections)... the conditions that IMF is likely to impose for releasing money will of course cause a great deal of short-term pain which may have a political fall-out," said Ambassador TCA Raghavan, former Indian envoy to Pakistan.