Arshad and Shahid stood a very good chance of making it to the squad with the selectors being keen to strengthen the bowling attack in the wake of fitness worries over pace bowlers Shoaib Akhtar, Mohammad Sami, Shabbir Ahmed and Umar Gul.
Hyderabad opener Faisal Athar, who scored four hundreds in the Quaid-e-Azam Trophy while accumulating 942 runs at an average of 70 and another 281 runs in local one-day tournament, was also vying for a spot for the high-profile tour.
Faisal has played just one one-dayer for Pakistan in 2003 in Sri Lanka.
"Shabbir only has a 50-50 chance to recover in time for the tour from his knee injury and Umar Gul has been ruled out because of a stress fracture in his back. Shoaib and Sami have also struggled with their fitness recently," a PCB official was quoted as saying in The News.
The official also said Pakistan was keen to take two specialist spinners to India as they were expecting slow turners for the three-Test series.
"At present we need someone to partner Danish Kaneria and the selectors feel Arshad, even at the age of 33, is the best choice because he is experienced and has consistently performed well at the domestic level," he said.
Arshad, who has taken 30 wickets from eight Tests and 44 wickets in 48 One-Day Internationals, last played for Pakistan in November 2000 against England.
Swing bowler Shahid Nazir, 27, made his last appearance for Pakistan in the 1999-2000 season against Sri Lanka after playing eight Tests and 17 one-dayers.
Both have performed impressively for their teams in the ongoing domestic season with Shahid topping the bowling averages with 52 wickets in the Quaid-e-Azam Trophy. Arshad, from Peshawar, ended with 39 wickets in the Quaid Trophy.
The official said once the team returned from Australia, the selectors would sit down with the team management to make the selections for the Indian tour.
"But there is a feeling we need to add depth and experience to the bowling even if Shoaib and Sami are available," the official said.