Pakistan will release a captured Indian pilot on Friday, Pakistani Prime Minister Imran Khan told a joint session of parliament on Thursday, in an overture towards New Delhi after soaring tensions fuelled fears of conflict between the nuclear-armed rivals.

"As a peace gesture we are releasing the Indian pilot tomorrow," Mr Khan said, a day after Wing Commander Abhinandan Varthaman was shot down in a rare aerial engagement between the South Asian neighbours over the disputed region of Kashmir.

Earlier on Thursday, Pakistan's foreign ministry said it was prepared to release the pilot if doing so would ease tensions with India.

"We are ready to hand over the Indian pilot if it leads to de-escalation," foreign ministry spokesman Mohammad Faisal told AFP, attributing the statement to Foreign Minister Shah Mehmood Qureshi.

The incident was the latest in a dangerous sequence of events between the two countries that have sent tensions rocketing, as major world powers including China, the US and the UN urged restraint.

It sparked fears of India and Pakistan - who have fought two wars and countless deadly skirmishes over Kashmir - entering a cycle of retaliation and counterattacks that could spiral out of control.

Mr Varthaman, who rapidly attained hero status in his own country, has become the face of the escalating conflict, with analysts touting him as a potential trump card for Islamabad and perhaps the key to bringing the arch-rivals back from the brink.

India will stand like a rock against 'enemy attack': Modi

Earlier, Prime Minister Narendra Modi asked Indians Thursday to "stand as a wall" with anger boiling over Pakistan's capture of a pilot as a crisis escalates between the nuclear-armed rivals.

In his first remarks since India and Pakistan both claimed to have shot down each other's fighter planes near the disputed border of Kashmir, the prime minister urged his countrymen to unite "as the enemy seeks to destabilise India".

Hindustan Times

"In the face of their objective, every Indian should stand as a wall, as a rock," Modi said.

"The entire country is one today and standing with our soldiers. The world is looking at our collective will and we have faith in our forces' capacity.

"India will live as one. India will work as one. India will grow as one. India will fight as one. India will win as one."

Modi did not mention Pakistan by name during the address to party workers.

According to Dr Monika Barthwal-Datta, an Asian government expert at the University of New South Wales, the current political climate is "particularly fraught".

"India is leading up to elections in a few months, and domestically on both sides, this has riled up public opinion," Dr Barthwal-Datta told SBS News.

"Emotions are running very high, you can see that playing out in TV studios and social media, there is a lot of war mongering and jingoistic talk."

- additional reporting Jessica Washington