New Playbook of Water Diplomacy

In the volatile and leaderless terrain of the G-zero world, where geopolitical alignments are increasingly fluid and institutional guardrails are weakening, India is redefining its diplomacy from restraint to resolve. Amidst its growing assertiveness in defence technology and trade diplomacy, one element of strategic inertia still stands out: The Indus Water Treaty (IWT) of 1960. As India navigates a landscape shaped by grey zone conflicts and economic shocks in the wake of military escalations with Pakistan, it becomes quintessential to rethink the Indus Water Treaty. No longer just a water sharing agreement, the IWT must be viewed as a tactical instrument of strategic deterrence and economic stabilisation.

The IWT, brokered by the World Bank, gave Pakistan access to the Western rivers (Indus, Chenab, and Jhelum) while India retained the Eastern rivers. While often praised as a model of resilience, having survived wars and diplomatic freezes, it was crafted in a very different geopolitical and economic context. Today, water has become not just a developmental issue but a geo-economic and security asset. India’s continued adherence to a rigid treaty interpretation despite repeated provocations and conflict raises important questions about its utility and strategic potential. Whenever India engages in military or quasi-military conflict with Pakistan, for instance, Kargil in 1999, Uri response in 2016, and Balakot airstrikes in 2019, the consequences are not just strategic but also economic. One of the most immediate outcomes is supply chain disruption and inflationary spikes, particularly in Northern India. Fuel prices surge, food logistics are disturbed, and infrastructure projects are delayed. Yet, one lever India has not used post-conflict to influence Pakistan’s strategic calculus or stabilise its post-conflict inflation trajectory is the Indus Water Treaty.

The critical question in this regard is: Can India afford to treat the Indus Water Treaty as merely a hydro-diplomatic relic when it holds untapped potential as a tool for economic stabilisation, energy security, and strategic deterrence in times of conflict?

India’s full development of hydropower on the western rivers, within its legal rights under the Indus Waters Treaty (IWT), could reduce reliance on thermal and imported energy, thereby helping to contain fuel costs-driven inflation in post-conflict scenarios. Simultaneously, accelerating irrigation on Indian-administered rivers would enhance water security for agriculture, softening agri-inflation shocks that typically follow military escalations. Demonstrating resilience in water infrastructure could also serve as an export signal, reinforcing investor confidence and supporting currency stability. Moreover, leveraging IWT as a tool of pressure diplomacy may help hasten de-escalation with Pakistan, softening conflict cycles that can otherwise disrupt India’s economic stability.

Historically, India has focused on foreign exchange interventions, monetary tightening, and food buffer releases as tools against post-conflict inflation. But a long-term solution, securing the water-energy-agricultural triangle, remains unutilised. Treating IWT as a static, off-limits document allows Pakistan to remain belligerent without consequences, while India bears the cost of restraint in both strategic and economic terms. The critical questions that arise in this context are: Shouldn’t water infrastructure be part of India’s inflation insurance strategy? Further, why has IWT never been considered in post-conflict economic recovery frameworks?

Pakistan’s approach has been to internationalise every Indian move, seeking the World Bank’s interventions and arbitration courts, along with global attention. But it maintains no similar treaty with China, which controls the upper reaches of many shared rivers. This asymmetry in Pakistan’s diplomatic behaviour provides a clear rationale for India to escalate the treaty from a moral obligation to a strategic choice. Across the world, treaties on water sharing are being updated in response to climate change. The Mekong Agreement, the Nile Basin Initiative, and even the US-Mexico Rio Grande framework are all adapting to rising hydrological volatility. But the IWT contains no adaptive clause for climate resilience, sustainability mechanisms, and inflation buffers. For a region already vulnerable to monsoon failure, glacier retreat, and rising energy costs, this is a strategic blind spot. In a world with no single power referee, diplomacy becomes a game of resource mobilisation and perception control. India’s commitment to a decades-old water sharing logic, while being targeted by terrorism across the border, weakens its global image.

Recent developments further sharpen the debate. In January 2023, India issued a formal notice to Pakistan seeking modifications to the treaty, citing Islamabad’s continued obstruction of Indian hydroelectric projects like Kishanganga and Ratle, despite India’s compliance with the treaty's terms. This marked a rare moment of diplomatic shift, signalling that New Delhi may no longer view the treaty as inviolable. The notice came after years of legal and technical wrangling, with Pakistan frequently taking India to international arbitration mechanisms, slowing down critical infrastructure. In March 2024, the Indian government reiterated its stand at the UN Water Conference, urging for global recognition of hydro-diplomacy as a tool for economic stability, not merely conflict prevention. Analysts interpreted this as an effort to reframe the IWT in economic terms before a global audience.

Further, the looming climate crisis adds new urgency. A joint report by the United Nations and the South Asian Network on Dams, Rivers, and People warns that Himalayan glacier retreat is expected to reduce water availability in the Indus Basin by up to 20 per cent by 2045. This could severely impact agriculture and livelihoods in both India and Pakistan. In such a scenario, maintaining a treaty framework that neither encourages adaptive infrastructure nor prepares for agricultural shocks is not just outdated, it is dangerous.

India must also consider the domestic political economy of river-sharing. In the states of Jammu and Kashmir, Himachal Pradesh, and Punjab, there is growing discontent about water resource underutilisation. Accelerating run-of-the-river hydroelectricity and irrigation infrastructure is no longer merely a national strategy; it is also a regional political necessity. Empowering state governments and local administrations with greater autonomy and financial resources for water-related projects on the western rivers could foster cooperative federalism and increase the speed of implementation. This would also align with India’s broader goals of decentralisation and climate resilience.

If India wants to lead in the Global South and stabilise its internal market post-crisis, it needs to show that it can adapt treaties not just for peace, but for performance. The IWT is no sacred scripture. It is a man-made document born in a different time. The rising costs of conflict, both economic and ecological, demand that India rethink how it relates to water, not just as a strategic cushion against bombs and breadline inflation. The new doctrine must be clear: India will uphold treaties, but not at the cost of its economy or security. If inflation is the hidden tax of war, water policy must be the first discount in peace.

In conclusion, India must develop a calibrated framework that aligns water strategy with inflation and security outcomes. This means integrating water governance into its economic risk mitigation strategy, deploying infrastructure as both a deterrent and a development instrument, and insisting that diplomatic history must yield to hydrological and geopolitical realities. It is time for India to turn the IWT from a Cold War-era peace compact into a 21st-century strategy tool—flexible, firm, and future-ready.

Amal Chandra is an author, political analyst, and columnist. Anusreeta Dutta is a cotutelle doctoral researcher of BITS Pilani (India)-RMIT (Australia), with prior experience as a political research and ESG analyst. Views expressed are personal