TLDR bullet summary:
Starting in '62 with the Chinese invasion of (parts of) India, JKF who himself was predisposed
to see the China-India conflict as a big deal in the cold war (given his '59 speech on that)
responded to Nehru's appeal for military aid with a fairly substantial US contribution.
According to McNamara, in '65 the annual US military aid to India was twice that to Pakistan.
This despite the fact that the US had been giving aid to Pakistan for much longer, so the
cumulative aid figure was in Pakistan's favor (in that kind of comparison).
The LBJ administration was quite displeased with the Indo-Pakistani war. That administration saw
it as war between two countries that the US wanted both as allies against communism/China. As a warning
to both countries, LBJ first cut any new aid to both during the summer, after disinviting both India's and Pakistan's leaders from visiting the US.
Successive US administrations also saw the various formal agreements with Pakistan as being against communism/China (despite Pakistan's efforts to make the US see India in the same bin) and so LBJ did not like the Pakistan-China rapprochement. Likewise, the lack of Pakistani contribution to the US effort in Vietnam annoyed the administration, given Pakistan's SEATO membership. Additionally, by the mid 1960s, the US valued less the "real estate" contribution that Pakistan was making to the US intelligence gathering due to increased capabilities of US satellites. Ultimately, during the war, the CIA reported with some alarm Chinese troop movements (or at least radio traffic thereof), raising the prospect that China would intervene in the war on Pakistan's side, fundamentally changing the nature of the war and the alliances in the region.
LBJ sent letters to both India's and Pakistan's leaders on 4 Sep, asking them to stop the fighting. When this didn't happen, he cut military aid to both countries. Military aid would later be resumed to Pakistan in '67, at lower levels, because the US was aware that Pakistan's military was much more dependant on it than India's military was.
A "Special National Intelligence Estimate" from Dec 7, 1965 indeed confirms indigochild's answer:
US Aid to the Subcontinent. The US has provided military and economic aid to both India and Pakistan. Over the past 15 years, the US has provided about $3 billion in economic aid to India and about $2.1 billion to Pakistan. In the same period, it also shipped PL 480 food grains worth some $3 billion to India and $1.1 billion to Pakistan. Military aid delivered to India (starting in 1963) has amounted to $92 million and to Pakistan (starting in 1954) $676.7 million. Since the outbreak of hostilities in September 1965, all US military aid has been stopped. No new US economic aid commitments have been made, but assistance already in the pipeline still goes on. PL 480 food grains shipments continue, but are committed on a short-term basis.
(Aside: PL-480 was Eisenhower's "Food for Peace" law for an aid programme, later boosted under Kennedy in 1961.)
If you're looking for confirmation that that military aid stoppage was due to the war, let me know, and I'll try to find an earlier document on that specific decision's rationale. Judging just from the above, it seems however that the Johnson (LBJ) presidency (started in 1963) tried to be a bit less one-sided on the subcontinent with military aid, which is probably why they started to give some to India in '63. So stopping aid for both in '65 is probably related to that approach.
A later retrospective State Department note (I'm not sure when it was written) likewise said:
In Washington, the Kashmir conflict reversed the inclination to pin U.S. policy to the military assistance program. The conclusion drawn was that it was self-defeating and a waste of money to provide military supplies to both sides of what looked to be an open-ended dispute. The focus of U.S. policy thereafter was on persuading India and Pakistan to limit military expenditures, and on ensuring that economic assistance was not diverted into military budgets. Until assurances could be received that such constraints would be exercised in India and Pakistan, the United States maintained the moratorium on military supplies and economic assistance established during the border war. The necessary exception to that rule was the provision of P.L. 480 supplies of food to help offset a famine which developed when the monsoon rains failed throughout the subcontinent in 1965.
That piece discusses more how annoyed Johnson was that despite the food aid, Ghandi continued to criticize the US over Vietnam. Anyhow, the Pakistani military was a lot more dependent on the US for spare parts, so in '67 LBJ decided to resume those:
During the course of the food crisis, the United States redefined its policy toward the subcontinent. Economic rather than military assistance became the basis of U.S. policy. There was concern, however, not to leave the military assistance field entirely to the Soviet Union in India and China in Pakistan. The Tashkent declaration was viewed as opening the possibility of limited arms sales to India and Pakistan. The Ayub government was particularly anxious to purchase spare parts for the U.S. supplied equipment used by the Pakistani armed forces. Bowles warned about the "profoundly adverse impact" on relations with India which a decision to sell spare parts to Pakistan would have. Despite that warning, the United States decided on March 31, 1967, to resume the sale of spare parts to Pakistan and India.
(The Tashkent declaration was the peace agreement that ended the '65 war.) Again, the LBJ administration apparently tried to appear even-handed in '67 by resuming (in theory) supply of parts to both sides, but I don't know if India cared anymore at that point.
Also, the USSR announced in '68 they'd be selling arms to Pakistan under the same terms as to India, although again that was probably less leveraged by Pakistan.
As for the US had decided to give military aid to India in '63, that decision was taken in the aftermath of Sino-Indian war.
The United States had a history of ambivalent relations with India. During the 1950s, U.S. officials regarded Indian leadership with some caution due to India's involvement in the nonaligned movement, particularly its prominent role at the Bandung Conference of 1955. The United States hoped to maintain a regional balance of power, which meant not allowing India to influence the political development of other states. However, a 1962 border conflict between India and China ended with a decisive Chinese victory, which motivated the United States and the United Kingdom to provide military supplies to the Indian army. After the clash with China, India also turned to the Soviet Union for assistance, which placed some strains on U.S.-Indian relations. However, the United States also provided India with considerable development assistance throughout the 1960s and 1970s.
(Apparently it was the "National Security Action Memorandum No 209, approved on December 10, 1962 by JFK" that gave military aid to India then.)
So yeah, it seems it was a complex calculation by the LBJ administration that they thought the probably could
both keep Pakistan in the US orbit (somewhat) and attract India as well.
It's also worth noting that prior to the '65 war, some in the LBJ administration even advised to sell advanced jets to India. From the book of H. W. Brands:
Shortly after his 1965 inauguration, as he prepared to escalate the war
on poverty in the United States and the war on communism in Vietnam,
Johnson had decided to shake up India and Pakistan. Shastri and Ayub
were scheduled to visit the United States, presumably with the goal of
receiving more American aid. Shastri had particularly in mind a shipment of American F-5 jets to counter Pakistan's American F-86s and F-104s. The White House staff pushed hard for approval of the F-5s. Harold Saunders acknowledged that approval would raise Ayub's ire, but he judged the repercussions manageable. "I think we ought to do what makes most political and military sense in India and then adjust to Pakistani pressures as necessary when we see how Ayub responds," Saunders said. The advantages in terms of tying the Indian military to the
United States, meeting India's security requirements against China, and displacing the Soviets, who had outfitted New Delhi with MiGs and probably would be happy to send more, seemed to overbalance the disadvantages in terms of cost and Pakistani irritation.
However, LBJ's own instincts were to poor cold water on both sides, rather than to increase military aid.
Johnson disagreed. The president not only refused to approve the F-5 transfer but abruptly canceled—in diplomatic parlance, "postponed"—both the Shastri and Ayub visits. A recent trip by Ayub to Beijing precipitated the president's disinvitation of the Pakistani leader, which he felt compelled to balance by doing the same to Shastri.
Yet the
decision reflected more than momentary pique. Aid for India and Pakistan had come under fire in Congress, and Johnson desired to head off a cutoff by showing that he was reviewing the situation himself. Additionally, he wanted to shock the beneficiaries of American assistance into realizing that the United States expected cooperation at the receiving end. Dean Rusk, relaying Johnson's decision to cancel the visits, told
the American embassies in New Delhi and Karachi to proffer the appropriate apologies. At the same time, the secretary said, the Indian and Pakistan governments should be apprised of the deep American dissatisfaction with their inability to make progress toward a settlement of the Kashmir quarrel. [...]
Yet if yanking back the welcome mat got the attention of the Indians and Pakistanis, it had no measurable effect in disposing them to settle their differences. Evidence, in fact, pointed in just the opposite direction. In May, Indian and Pakistani forces skirmished in the Rann of Kutch, a salt marsh east of the Indus delta where the India-Pakistan frontier had never been carefully surveyed, for the sound reason that neither country considered the region worth the expense. Pakistan's American tanks pushed several miles into indisputably Indian territory before a British-sponsored cease-fire took hold.
The Johnson administration adopted an agnostically pacifist attitude toward the affair—the same attitude the United States had taken toward India-Pakistan quarrels from the start. "In all candor we find it difficult to judge the merits of the Pakistani and Indian positions on the Rann of Kutch," the president wrote Ayub shortly after the fighting started. "But there can be no question as to the terrible consequences of a war between your two countries." Johnson urged Ayub and Shastri to move
as quickly as possible to settle the dispute before it escalated.
Johnson threatened no sanctions, such as a cutoff of American aid, at this point, and the fighting ended before he felt he had to. But the Kutch affair, despite its relatively harmless outcome, soon proved merely to foretell further conflict. [...] The Indians, humiliated in 1962 in battle with
the Chinese and now humbled by the Pakistanis, ached for revenge. [...] The Pakistanis may also have believed it made sense to fight before India got any more American weapons.
The shooting in the marshes of Kutch had hardly stopped when sniping began in the hills of Kashmir.
And again, it was LBJ almost by himself, against the advice of the State Department and NSC who decided to suspend (first) new aid during that summer; ostensibly this was for a review:
During this period of growing tension Johnson decided to suspend new aid to both countries. The State Department and the NSC staff advised against a suspension, believing it would diminish American influence at a time when Washington needed all the influence it could get. But Johnson held firm. "I'm not for allocating or approving $1 now unless I have already signed and agreed," Johnson scribbled across the
bottom of an aid authorization request from McGeorge Bundy. "If I have, show me when and where."
The president ordered a comprehensive review of American assistance to South Asia. The review served two purposes. First, it facilitated a cost-benefit analysis of American policy toward the region. Congress always appreciated evidence that foreign aid was accomplishing worthwhile tasks. Second, it afforded a pretext for procrastination. With conditions daily growing more disturbed in the subcontinent, discretion dictated delay. Such, at any rate, was Johnson's judgment.
Also the US administration was well aware of the greater impact the suspension had on Pakistan:
At the beginning of July, Robert McNamara sent Johnson a summary of the military aid program for South Asia. In the current fiscal year, the United States was providing India roughly $100 million in weapons, spare parts, and ammunition. Shipments to Pakistan amounted to slightly less than half this. Despite the two-to-one ratio in favor of India, a cutoff of
American military assistance, should the president deem this desirable, would more seriously affect Pakistan. India's arsenal still contained large quantities of weaponry from other countries, including the Soviet Union, that continued to supply New Delhi. Pakistan had depended primarily on the United States for a decade, and recent outsourcing to
China had done little to change the situation there. "U.S. logistics is the
lifeblood of the Pakistan armed forces," McNamara told Johnson. Because the Pakistan government would find it impossible to locate alternative suppliers of ammunition and spare parts on short notice, cancellation of American shipments would have a "very serious impact" on
Pakistan's ability to wage war. The defense secretary thought Ayub's
small squadron of F-104s would be grounded within a few weeks after the
onset of hostilities. A larger group of F-86s would last perhaps a few
months, depending on how quickly Pakistan's mechanics resorted to
cannibalization. [...]
Johnson continued to block new aid for India and Pakistan on the
last day of August, when the CIA reported that the Pakistan military had
had enough of Indian incursions across the truce line in Kashmir and
would strike back in force within hours. The prediction proved out the
next morning, as Ayub's armor rolled into action against Indian posi-
tions. [...]
B. K. Nehru,
reminded Rusk of Washington's oft-reiterated pledges that American
military aid to Pakistan would not be turned against India. The United
States must take measures to make Pakistan stop at once.
(I'm paraphrasing here, because this bit is getting long in the book):
At this point Chester Bowles, whom had long opposed military aid
to Pakistan altogether advised LBJ to cut it, but LBJ didn't immediately
take him up on that, hoping that the fighting would stop again as
it had happened in the Kutch. However, as the fighting continued in
September, the US increasingly started to fear that China would intervene
with troops on the Pakistani side:
The most alarming scenario, from the American—and
Pakistani—perspective, involved an Indian decision to widen the fight-
ing from the Kashmir-Punjab area to East Pakistan. Such a move would
threaten the integrity and very existence of the Pakistan state. It might
also force China to come to the aid of Pakistan, either by invitation or
by inability to resist the urge to hit the Indians when India was otherwise
engaged. Where that would leave the United States, still formally tied to
Pakistan, no one in Washington could tell. None wished to find out.
Various noises from China added to the American alarm. Beijing's
foreign minister Chen Yi traveled to Karachi to pledge his country's firm
support of Pakistan. The American National Security Agency, the top-
secret bureau charged with listening to all the world's radios, reported
an unusual number of encrypted, high-priority messages being trans-
mitted from Chinese stations close to the Indian border. The CIA noted
indications that Chinese troops in Tibet and Xinjiang had gone on
alert.
The prospect of Chinese intervention forced the Johnson administration to take a larger role in trying to stop the fighting. The president
wrote directly to Ayub and Shastri, advising them most energetically to
heed the United Nations call for a cease-fire. When this produced no
favorable response, he ordered Rusk to announce that all deliveries of
American weapons to both sides, whether supplied under agreement
with the American government or purchased commercially, were being
halted immediately.
The most relvant (chapter endonte) citations for that para are given as
- CIA cable, 9/7/65, box 129, Country file
- CIA to White House situation room, 9/10/65 and 9/15/65, ibid.; Komer memo, undated, box 150, ibid.
- Johnson to Ayub and Johnson to Shastri, 9/4/65, box 24, NSC history file.
(Again paraphrasing as this is long in the book:) Likewise LBJ switched PL-480 aid on a short-term decision basis so if needed
he could even use that as leverage, on the subcontinent and elsewhere.
(The law essentially gave the US president this power through a review mechanism
in the hands of the White House.) The latter measure was more of a threat to India than
to Pakistan, in the long run. LBJ felt that Nehru was prioritizing industrial
projects, including some military, instead of developing India's agriculture,
while increasingly relying on US food aid to keep up with population growth.
He also put pressure behind the scenes on
CENTO members Iran and Turkey to not aid Pakistan with parts either while
fighting was still going on.
Although LBJ's pressure(s) did thus contribute for the fighting to stop,
he won no friends in either Pakistan or India in the aftermath. He
was blasted by press on both sides. The Indians immediately increased
demand of Soviet military shipments (as the CIA intercepted their requests). There were anti-US riots in Pakistan etc.
Finally, for an open-access paper that has somewhat broader focus (than LBJ's time) you can look at Bolsinger's. It details more how the relations US-Pakistani relations became frayed and increasingly transactional earlier during JFK's presidency, essentially a deal in aid for access to real-estate from where the US could spy on the USSR and China. As US satellites became more capable in the mid 1960s, the US felt they were getting less of a deal out of the arrangement with Pakistan. In 1964, the US also reproached Pakistan that despite their SEATO membership Pakistan provided zero support for the US effort in Vietnam, unlike all other countries in that organization.
