You've gotten some essence of it right, though there are so many complex variable factors at play that it becomes inaccurate or skewed to narrow it down to any one single set of reasons.
Both sides, in our chequered history have a series of upmanship with one another, a series of what works, what doesn't and the subsequent consequences of each. Unfortunately, both sides seem to learn the lesson the hard way.
Storm is chaotic but certainly there's a sigh of relief when one can predict something by only watching the eye of the storm which is what Pakistani policy makers are doing by not playing into India's hands even though the situation would demand otherwise to a common Pakistani who has bore a lot from last 15-20 years.
I have deliberately omitted some spaces in my description of the problem for thinking minds to weigh in or else it becomes stupendous to elaborate what 'slowly-but-surely' policy of achieving goals of Naya Pakistan entails.
Speaking from Pakistan's POV - a country that has studied only one country in detail since its inception - there must be a reason for Pakistan to refrain from paying India back in the same coin. The point to drive home is that if India being
- A nation of 1.3 billion
- World's largest democracy with no shortage of strategists
- Plenty of monetary wealth
- $70 billion in defense budget
- Her retired army men on record to pay estranged groups money to conduct suicide bombing in Pakistan (and it takes PKR 1 million to hire a suicide bombing mission)
- with more than dozen Indian consulates/terror-launch pads in Afghanistan (where only one would have sufficed if it was a legit consulate)
- Idealizing Kautiliya who says make enemies of your enemies your friends
- Haven't refrained from using force of state since day one
- Not new to communal violence
- Knows how to kill Gandhi soon after the country's inception. Knows how to kill Indira Gandhi.
- Openly stating belligerent statement against Pakistan in every election campaign
- Desire to conspire against Pakistan the intent of which is declared, celebrated, and watched with eyes glued to Bollywood content which is the beating pulse of the nation
- Have the silent approval of West now to do whatever against Muslims or Pakistan
- Have diplomatic influence with Afghan & Iran government more than Pakistan has
- Technologically advanced to maintain contacts and pay terrorists money through dark-web, crypto-currency way without leaving a money trail or digital footprint
...
does not know how to conduct terrorism, hire proxies to infiltrate the hitherto fence-less border area of its arch rival and create a mayhem here. One needs to be a infant or imbecile to believe that. Sadly majority of Indians think that India is a victim and not a perpetrator of terrorism in the region.
The above mentioned points are not a praise to India in any way. Pakistani policy makers are weighing their tactics of turning the very strengths of India into its [India's] weaknesses, and this entails not paying India back in the same coin. Let them either respect Pakistan or collapse under their own weight. It seems ahead of time to state that.
While I think your train of thought is on track; it has given Indians fresh impetus to beat us in this specific game. India's economy gives it a distinct advantage of tackling Pakistan's initiatives. Until Pakistan comes up with wizardry to improve its economic situation in all areas, it will remain unable to dislodge or at least deny India its dominant position in economic warfare.
No country has benefited from a perpetual warfare (Sun Tzu).
There was a time Pakistan's GDP was ahead of India for many years so much so that India adopted the 'five-years plans' model of developing the economy from Pakistan.
Wars happened thereafter. Pakistan found it impossible to recover from wars.
A mind that's fit for waging war is not fit for running the municipal and day-to-day affairs of a welfare state.
With the madman at the helm of affairs in India who's trained in old fashion warfare since his young RSS days, there is no reason to believe that India's GDP growth rate will not fall if it pressed so hard on perpetuating violence even if it has to be on rival's soil. It happens so automatically.