This image taken from video released by Pakistan's military, shows what they claim to be an Indian pilot who was captured after his plane was shot down by Pakistan's Air Force in the country's part of Kashmir. Pakistan is set to free the pilot Friday in a "peace gesture" aimed at lowering temperatures with its nuclear arch-rival. File photo: Pakistan military via AP.

Islamabad - Pakistan was set to free a captured Indian pilot Friday in a "peace gesture" aimed at lowering temperatures with its nuclear arch-rival, after rare aerial raids ignited fears of a dangerous conflict in South Asia.

Pakistani authorities had not yet announced early Friday when or where Wing Commander Abhinandan Varthaman, who has become the face of the crisis between Islamabad and New Delhi, will be handed back to Indian officials. 

In New Delhi the announcement was seen as a diplomatic victory, with Indian leaders welcoming the pilot's return but announcing they would remain on "heightened" military alert, showing little sign of de-escalating the rivalry.

Abhinandan was shot down over Kashmir on Wednesday, after a dogfight in the skies over the disputed Himalayan region which sent tensions between India and Pakistan to their highest levels in years and alarmed world powers, who issued calls for restraint.

The latest confrontation between the neighbours, who have fought three wars since independence in 1947, erupted after a suicide bombing in Indian-held Kashmir killed 40 Indian troops on February 14, with the attack claimed by a Pakistan-based militant group. 

Twelve days later Indian warplanes launched a strike inside undisputed Pakistani territory, claiming to have hit a militant camp. It was the first such aerial raid since their last war in 1971 -- before either country had nuclear weapons. 

An infuriated Islamabad denied casualties or damage, but a day later launched its own incursion across the de facto Kashmir border which sparked the dogfight that ended in both countries claiming they had shot each other's warplanes down, and Abhinandan's capture. 

Analysts said the pilot could prove to be Islamabad's trump card, but Prime Minister Imran Khan unexpectedly announced Thursday that he would be released a day later as a "peace gesture", in the first sign of a potential thaw.

Khan alluded to the catastrophic consequences of nuclear war and called for talks, even as he warned India should not take the announcement as a sign of weakness.

Media reports have said Abhinandan could return through the Wagah crossing gate, famed for hosting a daily ceremony by Indian and Pakistani soldiers at sundown. 

The pilot's parents travelled to Amritsar, near Wagah, via Delhi late last night and were applauded by all the passengers on the plane they travelled on, TV footage showed.

With the pilot attaining hero status and the hashtag #WelcomeBackAbhi swiftly trending on social media, India's Prime Minister Narendra Modi called on his citizens to "stand as a wall" in the face of an enemy that "seeks to destabilise India". 

The last time an Indian pilot was captured by Pakistan, in 1999, the handover was facilitated by the International Committee of the Red Cross (ICRC), who acted as a "neutral intermediary" after Indian officials refused to receive him before media. 

Instead, Red Cross officials received the pilot, Flight Lieutenant K. Nachiketa, at the Pakistani foreign office in Islamabad before escorting him to the Indian high commission overnight.

He left for India that same day.

Kashmir is ruled in part but claimed in full by both India and Pakistan. Two of their three wars have been fought over the territory.

AFP