Welcome to Foreign Policy’s South Asia Brief.

The highlights this week: India hosts Egypt’s president at its Republic Day occasions, Pakistan’s economic system will get off to a foul begin in 2023, and a brand new report makes severe allegations towards India’s Adani Group.

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India celebrated its Republic Day on Thursday, marking the day in 1950 when its structure got here into impact. The vacation consists of the customized of a big army parade, with a international chief attending as chief visitor. This yr, India accorded the distinction to Egyptian President Abdel Fattah al-Sisi—the primary chief visitor since 2020, because of the COVID-19 pandemic.

India tends to pick out international leaders deemed essential to its foreign-policy pursuits—most just lately, representatives from Brazil, South Africa, the Association of Southeast Asian Nations, France, and the United States. Choosing Sisi displays the quiet strengthening of India-Egypt ties, and it additionally hints at India’s tilt towards the Middle East, which New Delhi regards as economically and strategically important.

India and Egypt share some similarities. Both have been leaders of the Non-Aligned Movement in the course of the Cold War and later developed into regional powers. Their relationship lapsed as Egypt grew near the United States and India to the Soviet Union. But it took off in latest many years with high-level dialogues, army workouts, and elevated commerce between the 2 nations. India is at the moment Egypt’s third-largest export market, and Cairo is desirous about buying Indian fighter jets.

New Delhi has a number of strategic causes to deepen ties with Cairo. The first is location. The Suez Canal and close by Gulf of Aden are key to Indian commerce routes. Second, Egypt is the Middle East’s most populous nation and boasts one in all its largest militaries. It’s additionally caught up in geopolitical competitors: China has just lately invested heavily in Egypt, incentivizing India to push again. Finally, Egypt enjoys shut ties with each Saudi Arabia and the United Arab Emirates, two of India’s closest companions within the Middle East.

As Sisi started his go to on Wednesday, New Delhi and Cairo announced that they’d elevate their relationship to a strategic partnership. One of India’s present foreign-policy objectives is to make use of its bilateral relationships to pursue cooperation with different nations as nicely, and its relationship with Egypt must be seen towards the backdrop of its rising ties with the broader area.

The Middle East is a crucial supply of Indian energy imports and infrastructure assistance and a key provider of water-saving agricultural technologies. The Persian Gulf area hosts greater than 8 million Indian staff, lots of whom ship again remittances. And in contrast to many Western companions, Middle Eastern leaders don’t criticize New Delhi over its home insurance policies. With the occasional exception, Middle Eastern nations have even steered away from mentioning India’s rising violence towards its Muslim minority in addition to derogatory speech that targets Islam.

In the Middle East, India has commerce companions in addition to shut pals akin to Israel. Egypt’s long-standing formal relationship with Israel, together with normalized ties between Israel and 4 different Arab states by way of the 2020 Abraham Accords, creates pathways for India to pursue multilateral preparations within the area. Analyst Mohammed Soliman factors out that New Delhi’s rising ties with Cairo can facilitate stronger multilateral relations, as each nations are eager to pursue “close coordination” on regional issues from safety to international disaster response.

The Middle East offers India alternatives to showcase its diplomatic clout and dedication to multilateralism in areas past Asia, significantly because it appears to make use of its G-20 presidency to function a bridge between wealthy economies and creating states. India’s relationship with Egypt matches properly with that ambition: Cairo has shut ties to Riyadh, the G-20’s solely Middle Eastern member, however it’s additionally probably the most highly effective actors in a area populated primarily by creating states.

So it’s no shock that India tapped Sisi as this yr’s Republic Day chief visitor. Perhaps what’s putting is that within the 69 years that New Delhi has granted the distinction, it’s simply the fourth time it has been bestowed on a frontrunner from the Middle East. Consider it one other information level that attests to India’s rising relations with the area—and shifting function on the world stage.

Bad indicators for Pakistan’s economic system. This week introduced two unhealthy omens for Pakistan’s free-falling economic system. On Monday, a lot of the nation suffered a massive power outage, with just a few areas nonetheless at midnight on Thursday. The State Bank of Pakistan additionally announced that it might increase rates of interest from 16 to 17 %—a 26-year excessive—in an effort to sort out persistent excessive inflation. The transfer marks the eighth time the financial institution has raised charges since September 2021.

This week’s energy outages prompted an estimated $70 million in losses for Pakistan’s most essential export sector, textiles. And the rate of interest hike will add to weak client demand and financial progress prospects. As it stands, Pakistan has sufficient foreign reserves to pay for less than three weeks’ price of imports. The massive query is whether or not Pakistan will default on its exterior debt; it should pay back greater than $6 billion in debt in January and February.

Avoiding that state of affairs would require extra help from the International Monetary Fund (IMF), at least. But the IMF has held off as a result of Islamabad has refused to part out subsidies for some meals and gasoline merchandise, fearing the political penalties. Pakistan would additionally profit from extra bailout funds from its rich companions within the Persian Gulf. The United Arab Emirates just lately announced $3 billion in help, and Saudi Arabia is considering an $11 billion package deal.

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, launched final week, focuses on long-standing allegations that Modi—then the chief minister of Gujarat—didn’t do sufficient to cease the 2002 riots within the state that killed more than 1,000 people, most of them Muslims. The movie reveals that the United Kingdom carried out a non-public investigation that implicated Modi. India has banned the documentary.

Some of New Delhi’s anger seems rooted in the truth that a international media outlet is revisiting allegations that India’s Supreme Court has dismissed. But the talk additionally reveals how the legacy of colonialism nonetheless shapes India in complicated methods. Arindam Bagchi, a spokesperson for India’s Ministry of External Affairs, said the documentary mirrored a “colonial mindset” for its perceived meddling in home affairs, whereas different Indian observers have accused the BBC of making an attempt to reopen previous wounds.

In Foreign Policy this week, Salil Tripathi took a better take a look at why India banned the BBC documentary.

Beijing affords debt moratorium to Sri Lanka. This week, China’s Export-Import Bank offered a two-year debt moratorium to Sri Lanka. Colombo at the moment owes 52 percent of its international debt to Beijing. China has additionally assured Sri Lanka that it helps its efforts towards finalizing a brand new IMF mortgage package deal. China hasn’t just lately provided debt reduction to some other struggling economic system, together with its ally Pakistan. The transfer was possible prompted by the sheer scale of Sri Lanka’s debt since its default final yr, which stands at roughly $50 billion.

China can also be all the time looking for alternatives to one-up India amid intensifying regional competitors. Last week, Indian External Affairs Minister S. Jaishankar visited Colombo and pledged “financing assurances” to the IMF to assist transfer the needle ahead on a bailout plan, with out elaborating. India didn’t supply to delay Sri Lanka’s debt funds—however then once more, Colombo owes solely 12 percent of its international debt to New Delhi.

India’s Adani Group accused of malfeasance. The U.S.-based funding analysis agency Hindenburg Research revealed a report this week primarily based on a two-year investigation that accuses India’s Adani Group of many years of “brazen stock manipulation” and accounting fraud. The conglomerate is led by Gautam Adani, one of many world’s richest people. Adani Group owns firms in a spread of sectors from power to meals; its most outstanding recent acquisition is the Indian broadcaster NDTV.

If Adani Group collapsed, there can be devastating penalties for markets, traders, 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 revealed, lots of the agency’s listed firms—together with the flagship Adani Enterprises—noticed their stocks fall between 3 and 5 %.

There’s a brand new twist within the story of a Russian industrial ship denied the right to dock in Bangladesh final month due to U.S. sanctions on the vessel. The ship, bearing elements for a Russia-funded nuclear energy plant, was pressured to show away and ended up at India’s Haldia port. At the time, it appeared that the ship’s items can be offloaded in India and transferred to a different ship earlier than continuing to Bangladesh.

However, the Bangladeshi press now reports that India by no means gave permission to the Russian ship to unload its items, and after ready two weeks, the ship returned to Russia. In a putting concession to Washington, it seems that New Delhi declined to cooperate with the Russian ship. It’s additionally notable that Donald Lu, the senior U.S. diplomat for South Asia, visited each India and Bangladesh simply earlier than the ship departed. (Bangladeshi studies suggest there could also be a hyperlink between Lu’s go to and India’s choice.)

Russia has not been deterred. After the ship left India, Bangladeshi officers have been informed that the Russians would put the products on a brand new ship—presumably not beneath U.S. sanctions—and ship it again to Bangladesh. The query is whether or not the United States will as soon as once more strain Bangladesh to not let the ship dock, leaving it caught in the course of an intensifying U.S.-Russia rivalry.

• 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 deal with his alleged function within the 2002 Gujarat riots, arguing that India’s Muslims merely wish to transfer 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 danger 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 risks of mind drain in Bhutan, estimated to have an effect on 6 % 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.