On Republic Day, India Looks to Deepen Middle East Ties
Welcome to Foreign Policy’s South Asia Brief.
The highlights this week: India hosts Egypt’s president at its Republic Day events, Pakistan’s economy gets off to a bad start in 2023, and a new report makes serious allegations against India’s Adani Group.
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India’s Middle East Pivot
India celebrated its Republic Day on Thursday, marking the day in 1950 when its constitution came into effect. The holiday includes the custom of a large military parade, with a foreign leader attending as chief guest. This year, India accorded the honor to Egyptian President Abdel Fattah al-Sisi—the first chief guest since 2020, due to the COVID-19 pandemic.
India tends to select foreign leaders deemed important to its foreign-policy interests—most recently, representatives from Brazil, South Africa, the Association of Southeast Asian Nations, France, and the United States. Choosing Sisi reflects the quiet strengthening of India-Egypt ties, and it also hints at India’s tilt toward the Middle East, which New Delhi regards as economically and strategically significant.
India and Egypt share some similarities. Both were leaders of the Non-Aligned Movement during the Cold War and later evolved into regional powers. Their relationship lapsed as Egypt grew close to the United States and India to the Soviet Union. But it took off in recent decades with high-level dialogues, military exercises, and increased trade between the two nations. India is currently Egypt’s third-largest export market, and Cairo is interested in purchasing Indian fighter jets.
New Delhi has several strategic reasons to deepen ties with Cairo. The first is location. The Suez Canal and nearby Gulf of Aden are key to Indian trade routes. Second, Egypt is the Middle East’s most populous country and boasts one of its largest militaries. It’s also caught up in geopolitical competition: China has recently invested heavily in Egypt, incentivizing India to push back. Finally, Egypt enjoys close ties with both Saudi Arabia and the United Arab Emirates, two of India’s closest partners in the Middle East.
As Sisi began his visit on Wednesday, New Delhi and Cairo announced that they would elevate their relationship to a strategic partnership. One of India’s current foreign-policy goals is to use its bilateral relationships to pursue cooperation with other countries as well, and its relationship with Egypt should be seen against the backdrop of its growing ties with the broader region.
The Middle East is a critical source of Indian energy imports and infrastructure assistance and a key supplier of water-saving agricultural technologies. The Persian Gulf region hosts more than 8 million Indian workers, many of whom send back remittances. And unlike many Western partners, Middle Eastern leaders don’t criticize New Delhi over its domestic policies. With the occasional exception, Middle Eastern countries have even steered clear of mentioning India’s increasing violence against its Muslim minority as well as derogatory speech that targets Islam.
In the Middle East, India has trade partners as well as close friends such as Israel. Egypt’s long-standing formal relationship with Israel, along with normalized ties between Israel and four other Arab states through the 2020 Abraham Accords, creates pathways for India to pursue multilateral arrangements in the region. Analyst Mohammed Soliman points out that New Delhi’s growing ties with Cairo can facilitate stronger multilateral relations, as both countries are keen to pursue “close coordination” on regional matters from security to global crisis response.
The Middle East gives India opportunities to showcase its diplomatic clout and commitment to multilateralism in areas beyond Asia, particularly as it looks to use its G-20 presidency to serve as a bridge between rich economies and developing states. India’s relationship with Egypt fits nicely with that ambition: Cairo has close ties to Riyadh, the G-20’s only Middle Eastern member, but it’s also one of the most powerful actors in a region populated mainly by developing states.
So it’s no surprise that India tapped Sisi as this year’s Republic Day chief guest. Perhaps what’s striking is that in the 69 years that New Delhi has granted the honor, it’s just the fourth time it has been bestowed on a leader from the Middle East. Consider it another data point that attests to India’s growing relations with the region—and shifting role on the world stage.
Bad signs for Pakistan’s economy. This week brought two bad omens for Pakistan’s free-falling economy. On Monday, most of the country suffered a massive power outage, with a few areas still in the dark on Thursday. The State Bank of Pakistan also announced that it would raise interest rates from 16 to 17 percent—a 26-year high—in an effort to tackle persistent high inflation. The move marks the eighth time the bank has raised rates since September 2021.
This week’s power outages caused an estimated $70 million in losses for Pakistan’s most important export sector, textiles. And the interest rate hike will add to weak consumer demand and economic growth prospects. As it stands, Pakistan has enough foreign reserves to pay for only three weeks’ worth of imports. The big question is whether Pakistan will default on its external debt; it must pay back more than $6 billion in debt in January and February.
Avoiding that scenario will require more assistance from the International Monetary Fund (IMF), at the least. But the IMF has held off because Islamabad has refused to phase out subsidies for some food and fuel products, fearing the political consequences. Pakistan would also benefit from more bailout funds from its wealthy partners in the Persian Gulf. The United Arab Emirates recently announced $3 billion in aid, and Saudi Arabia is considering an $11 billion package.
Modi documentary stirs controversy. New Delhi has reacted angrily to a two-part BBC documentary that chronicles the political rise of Prime Minister Narendra Modi. The first episode, released last week, focuses on long-standing allegations that Modi—then the chief minister of Gujarat—didn’t do enough to stop the 2002 riots in the state that killed more than 1,000 people, most of them Muslims. The film reveals that the United Kingdom carried out a private investigation that implicated Modi. India has banned the documentary.
Some of New Delhi’s anger appears rooted in the fact that a foreign media outlet is revisiting allegations that India’s Supreme Court has dismissed. But the debate also reveals how the legacy of colonialism still shapes India in complex ways. Arindam Bagchi, a spokesperson for India’s Ministry of External Affairs, said the documentary reflected a “colonial mindset” for its perceived meddling in domestic affairs, while other Indian observers have accused the BBC of trying to reopen old wounds.
In Foreign Policy this week, Salil Tripathi took a closer look at why India banned the BBC documentary.
Beijing offers debt moratorium to Sri Lanka. This week, China’s Export-Import Bank offered a two-year debt moratorium to Sri Lanka. Colombo currently owes 52 percent of its foreign debt to Beijing. China has also assured Sri Lanka that it supports its efforts toward finalizing a new IMF loan package. China hasn’t recently offered debt relief to any other struggling economy, including its ally Pakistan. The move was likely prompted by the sheer scale of Sri Lanka’s debt since its default last year, which stands at roughly $50 billion.
China is also always seeking opportunities to one-up India amid intensifying regional competition. Last week, Indian External Affairs Minister S. Jaishankar visited Colombo and pledged “financing assurances” to the IMF to help move the needle forward on a bailout plan, without elaborating. India didn’t offer to delay Sri Lanka’s debt payments—but then again, Colombo owes only 12 percent of its foreign debt to New Delhi.
India’s Adani Group accused of malfeasance. The U.S.-based investment research firm Hindenburg Research published a report this week based on a two-year investigation that accuses India’s Adani Group of decades of “brazen stock manipulation” and accounting fraud. The conglomerate is led by Gautam Adani, one of the world’s richest people. Adani Group owns companies in a range of sectors from energy to food; its most prominent recent acquisition is the Indian broadcaster NDTV.
If Adani Group collapsed, there would be devastating consequences for markets, investors, banks, and Indian taxpayers with funds in government banks linked to the conglomerate.
Adani Group rejected the Hindenburg report, denouncing it as “selective misinformation and stale, baseless and discredited allegations.” Immediately after the report was published, many of the firm’s listed companies—including the flagship Adani Enterprises—saw their stocks fall between 3 and 5 percent.
There’s a new twist in the tale of a Russian commercial ship denied the right to dock in Bangladesh last month because of U.S. sanctions on the vessel. The ship, bearing parts for a Russia-funded nuclear power plant, was forced to turn away and ended up at India’s Haldia port. At the time, it seemed that the ship’s goods would be offloaded in India and transferred to another ship before proceeding to Bangladesh.
However, the Bangladeshi press now reports that India never gave permission to the Russian ship to unload its goods, and after waiting two weeks, the ship returned to Russia. In a striking concession to Washington, it appears that New Delhi declined to cooperate with the Russian ship. It’s also notable that Donald Lu, the senior U.S. diplomat for South Asia, visited both India and Bangladesh just before the ship departed. (Bangladeshi reports suggest there may be a link between Lu’s visit and India’s decision.)
Russia has not been deterred. After the ship left India, Bangladeshi officials were informed that the Russians would put the goods on a new ship—presumably not under U.S. sanctions—and send it back to Bangladesh. The question is whether the United States will once again pressure Bangladesh not to let the ship dock, leaving it caught in the middle of an intensifying U.S.-Russia rivalry.
FP’s Most Read This Week
• Why India Banned the BBC’s Modi Documentary by Salil Tripathi
• Turkey’s Problem Isn’t Sweden. It’s the United States. by Halil Karaveli
• The Real Reason Behind Peru’s Political Crisis by Simeon Tegel
In the Indian Express, Aligarh Muslim University Vice Chancellor Tariq Mansoor lambastes the BBC’s Modi documentary and its focus on his alleged role in the 2002 Gujarat riots, arguing that India’s Muslims simply want to move on. “The BBC has assembled 20 years of biased reportage, peppered it with outdated condiments and garnished it with loads of misplaced victimhood,” he writes.
Analyst Noorulain Naseem warns in South Asian Voices that U.S.-China tensions risk triggering an arms race in South Asia. “Competition between the United States and China has resulted in an accelerated piling of weapons, enabling India and Pakistan’s capabilities against each other,” she writes. “This makes the current defense partnership between China-Pakistan and U.S.-India more threatening to the region’s security dilemma.”
Writer Jigme Tashi discusses the dangers of brain drain in Bhutan, estimated to affect 6 percent of the civil service, in Kuensel: “Considering our population size, and the limited number of people available in the market with similar experience and skills to replace those who exited the system, unlike other countries, the attrition rate of even 5 or 6% is a serious concern,” he writes.