"The likely rewards for Pakistan can be largely defined in concrete economic terms, the combined effect of which would boost the country's positive credit rating trajectory. For India, however, the benefits are of a less tangible nature, and would accrue more to New Delhi's international standing," S&P said in its latest report.

S&P rates Pakistan's foreign currency at "B+" with "Stable" outlook and local currency at "BB" with "Stable" outlook while India enjoys a higher rating of "BB+" with "Stable" outlook.

For India, S&P said, "the benefits are clearly more on the political side, rather than economic."

Although there would be tangible gains from increased trade with Pakistan and easier access to Iranian gas, these would be less significant to India because of the comparative size of India's economy over Pakistan, it said. India's greatest mileage from a deep rapprochement with Pakistan would accrue from its improved standing on the world stage and with the US.

This in turn could prove instrumental in better trade and defence ties with the superpower, and would also advance India's claim to a permanent seat in the Security Council. Terming the thaw in relations as "impressive", S&P said despite occasional setbacks, the two countries have come a long way since the Lahore Declaration in 1999.

Listing out the three major benefits to Pakistan, S&P said improvement in ties would reduce its military expenditure, which could be channelised in social sector. This would help Pakistan attain better fiscal balance and reduce debt burden.

Pakistan's defence expenditure has averaged 25 per cent of total expenditure, or 4.5 per cent of GDP, over the past eight years. This has dwarfed its development funding, which averaged 13.6 per cent of expenditure.

This is a level of defence spending that Pakistan can ill afford, S&P said.