Pakistan carried out a second missile test in three days on Monday, and India said it ordered several states to conduct security drills, as fears mounted the neighbors could be heading to a confrontation over a deadly attack in Kashmir.
Moody's warned that the standoff could set back Islamabad's economic reforms as world powers called for calm.
Relations between the nuclear-armed states have nosedived since gunmen killed 26 people on April 22 in an attack targeting Hindu tourists in Indian Kashmir, the worst such assault on civilians in India in nearly two decades.
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