Developereo
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The difference is that when you say 'Indian military is preparing for two-front war, it means that India is going to attack both India and China. When we say we are prepared for a two-front war, it means that we are alive to the possibility that in a remote case, you might attack us.
This is called hoping for the best and being prepared for the worst. I hope you understand now.
I understood it to mean "India is preparing its capabilities to meet a two-front war with Pakistan and China -- if it should happen".
It's like "I'm preparing for guests to arrive".