In Pakistan, Prime Minister Imran Khan tried to defuse the tensions by saying that war is futile and can lead to unknown consequences while making an oblique reference to the nuclear weapons that both countries possess.
A day after India bombed Jaish-e-Mohammed's biggest training camp in Pakistan, it was a morning of developments moving with dizzying rapidity.
During the encounter, a MiG 21 was lost and the pilot was missing.
As tension mounted, the entire airspace north of New Delhi was briefly "vacated". Nine airports in Jammu and Kashmir, Himachal Pradesh and Punjab were closed for civilian traffic for some part of the morning but opened later in the day.
There was no direct established link with the activity by Pakistani jets, but for many it was just a sign of the disturbed times.
All residents of the border areas were asked to remain inside their homes and not venture outside.
While the government and the defence establishment took stock of the situation, building up since the February 14 attack on a CRPF convoy in Pulwama in which 40 soldiers were killed, attention swivelled on the missing IAF pilot in enemy territory who was neither named nor his designation disclosed.
In a terse press statement, External Affairs Ministry Spokesperson Raveesh Kumar, accompanied by Air Vice Marshal R G K Kapoor, said details are being ascertained about Pakistan's claim of having captured one Indian pilot.
Officials said Pakistani fighter jets violated Indian air space in Jammu region's Poonch and Rajouri sectors but were pushed back by Indian aircraft. The jets dropped bombs while returning but there were no immediate reports of casualties or damage, they said.
"Pakistan has responded this morning by using its Air Force to target military installations on the Indian side. Due to our high state of readiness and alertness, Pakistan's attempts were foiled successfully," Kumar said.
He said the Pakistan Air Force activity was detected and the Indian Air Force responded instantly.
"In that aerial engagement, one Pakistan Air Force fighter aircraft was shot down by a MiG 21 Bison of the Indian Air Force. The Pakistani aircraft was seen by ground forces falling from the sky on the Pakistan side.
In Islamabad, the Pakistan Army released a 46-second video showing a blindfolded man claiming he is IAF's Wing Commander Abhinandan.
"I am an IAF officer. My service No is 27981," the man is seen as saying in the video.
The veracity of the video could not be ascertained.
Pakistani military spokesperson Major General Asif Ghafoor claimed that two IAF pilots were arrested. One pilot is injured and has been shifted to a hospital, while another one is unhurt, he added, showing documents of the arrested pilots but identifying only one.
Till late afternoon, India's political leaders, both in government and in the opposition, were mostly quiet.
In a live television broadcast, Pakistan's leader Imran Khan also reiterated the military's claim that two Indian MIGs were shot down, as he offered to defuse tensions and resolve the issues through talks.
He said the Pakistani incursion into the Indian air space was "only intended to convey that if you can come into our country, we can do the same." Two Indian MiGs were shot down in the ensuing action, Khan said, one day after Indian government sources said up to 350 JeM terrorists were killed in Tuesday's attack. There was no official confirmation of the claim.
"I ask India: with the weapons you have and the weapons we have, can we really afford a miscalculation? If this (situation) escalates, it will no longer be in my control or in (Prime Minister) Narendra Modi's," Khan said.
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