The November 2008 terrorist attacks in Mumbai are analysed through six changing equations in Indiaâ€“Pakistan relations. The balance between military response and inaction is shifting towards the former. India has a vested but no longer critical interest in a strong and stable Pakistan. Pakistanâ€™s deniability has been based on separation between the government, army, ISI and terrorists whose plausibility is fading. To reverse the worsening security situation, Pakistanâ€™s military must be brought under full civilian control. Failing that, India will have to acquire the military capacity and political will to destroy the human and material infrastructure of terrorism in Pakistan. Finally, the rewards for Pakistanâ€™s contributions to the war on terror in Afghanistan exceed penalties for its fuelling of terror in India. The structure of incentives and penalties must be reversed.