November’s meeting of South Asian countries in Islamabad is hanging in the balance after four countries, led by India, said they would boycott it following this month’s attack on an Indian army base in Kashmir, which killed 18 troops.

India announced it would not attend the summit as a result of the attack, a move swiftly followed by Bhutan, Bangladesh and Afghanistan.

“Increasing cross-border terrorist attacks in the region and growing interference in the internal affairs of member states by one country have created an environment that is not conducive to the successful holding of the 19th summit in Islamabad,” New Delhi’s ministry of external affairs said in a statement.

The co-ordinated move is India’s latest attempt to isolate Pakistan and use non-military means of punishing its neighbour for the attack on the Uri base.

Warning on Tuesday that “blood and water cannot flow together”, Indian Prime Minister Narendra Modi threatened to maximise India’s use of water in three rivers that flow through India to Pakistan: the Indus, Jhelum and Chenab. This would limit the amount of water that flows to Pakistani agriculture and hydroelectric projects.

Mr Modi has also suspended the meetings of commissioners employed by Pakistan and India to arbitrate on disputes relating to the usage of water from six rivers flowing through India into Pakistan.

New Delhi is having to be inventive in its efforts to retaliate against Pakistan after the Uri attack.

The prime minister’s Bharatiya Janata party has put the blame for the attacks on Islamabad and the Pakistan-based Islamist extremist group, Jaish-e-Mohammad. Officials in Islamabad have dismissed Mr Modi’s comments about Pakistan since that attack as “mere propaganda”.

But with analysts warning that India has limited scope for military retaliation, New Delhi is now looking for other options to assert itself over its neighbour.

India could limit the water to which Pakistan has access without breaking the terms of the Indus Water Treaty, which both countries signed in 1960.

The agreement entitles India to 20 per cent of the water that flows through the Indus river, enough to irrigate 1.3m acres. Currently, however, the country is using enough to irrigate just 800,000 acres, according to reports sourced to Indian officials.

The Indus is one of three rivers from which Modi has threatened to take more water © Getty

But while increasing its water usage might be a convenient and legal way to take revenge on Pakistan, it would not necessarily be easy. India lacks the facilities to store the extra water, and would have to build more if it wanted to maximise its usage.

Water has been a regular source of tension between the two countries. The arbitration panel that Mr Modi has now suspended was set up in 2010 after a dispute over India’s plans to build a 330-megawatt hydroelectric project in Kashmir on the Kishanganga river. Pakistan claimed that project would adversely affect its own 969MW Neelum-Jhelum project, being built downstream on the Jhelum with Chinese backing.

While Pakistani officials said Mr Modi’s threats were unlikely to have an immediate impact on Pakistan, others lamented the ramping up of his rhetoric.

“One of the remarkable aspects of the Indo-Pak treaty on sharing of river water has been that the treaty has survived [past] wars,” said one senior foreign ministry official. “Now Mr Modi wants to end that treaty, he [Modi] wants to rip up that history.”

Meanwhile, the next tool at Mr Modi’s disposal appears to be trade.

The prime minister will chair a meeting on Thursday to review the “most favoured nation” status it has granted to Pakistan under World Trade Organisation rules. Under those terms, India cannot levy higher tariffs or impose lower trade quotas on Pakistan than it does on any other nation.

While any move to change Pakistan’s status could prove economically counterproductive, experts say the impact would be limited. According to figures from the Associated Chambers of Commerce of India, Pakistan accounts for just 0.83 per cent of India’s total exports, while imports make up 0.13 per cent.

“MFN [most favoured nation] status or no MFN has not made much of a difference on the bilateral trade,” said DS Rawat, secretary-general of Assocham.

Additional reporting by Farhan Bokhari in Islamabad

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