Global
Two politicians of India are ruling party BJP has put the Modi government in a great deal of trouble with their remarks on TV on the Prophet of Islam. While Modi and BJP have both tried to distance themselves from the two saying the two don't represent India or the party, the damage is done. This is always the case when populism is used by a party to control crowds and politics.
The impact now internally is in the shape of unrest and anger by the Indian Muslims but it has spread beyond India's borders. It really doesn't matter what Pakistan says but what the Arab countries say does as India has a stake in selling goods and seeking employment in that zone. It's hurting but India will pull out of this in the short run no doubt. But in the long run, the troubles look like a shadow that may become bigger. The scenario may be "prophetic" of the troubles that may come India's way in the future as by product of BJP's current "anti-Muslim" policy.
Cultural factors and politics
Pakistan and India are pretty much similar in many ways when it comes to politics. Pakistan has Islam with which it justified what they did to Bangladesh till 1971 and then got bumped. Not many states get halved as Pakistan did in 1971 which it claimed was in the name of defending Islam. Fifty years later, Pakistan is limping behind Bangladesh in every indicator and faces an almost constant crisis in every sector including the latest Imran-Shahbaz one. The army reigns supreme and if all this was justified by economic development, it might even be an argument. Sadly, it's so seriously messed up right now. Pak media praises BD's development but keeps hoping it will form an alliance with it against India. Pakistan exists only because India does, it seems sometimes.
Is India very different?
India sees Pakistan - no comparison in any sector including military strength- as its main enemy and national priority. Anyone reading Indian media will know of its total obsession with Pakistan. Even as the latest crisis was being played out, the media was bashing Pakistan and OIC was called a "stooge of Pakistan". Those protesting the remarks were accused as pro-Pakistanis and various groups also fanned anti-Muslim sentiments which all are equated as identity of the enemy-Pakistan. Just as Hindus meant Indians in 1971, Muslims have become Pakistanis to many Indians particularly the BJP and its allies. It seems both are each other's twin. The war of 1947 continues with people and governments of the two states.
Dangerously out of date?
Pakistan is internally repressive of its Hindu minority who are very few but it angers the majority of Indians. The problem is with India whose minority Muslims have a global constituency and impacts in many parts of the world. Indian remarks angered the Arabs and Muslims elsewhere and Arabs matter though Pakistanis don't. And that may come with a price, mostly economic. International relations is all about selling goods and for a still non-rich country like India, about getting jobs in the zone. And even if it's settled now, the brand has been damaged. Some have remarked that the US is pushing the Arabs to go against India as a punishment for trading with Russia but that is only to be expected. That's what everyone does. India will probably come out of the mess but its vulnerability is exposed.
Limits of BJP policy
The limits of anti-Muslim policy has worked in Myanmar, ASEAN zone and even China with its Uighur issue but India can't do it when issues cross its borders as this one did and it needs the markets. It doesn't matter who said what and why, the reality is, what hurts India won't work. But BJP has built its political machine based on anti-Muslim/Pakistan sentiment so the damage control efforts now may be counter-productive internally. Its constituency wants harshness not moderation.
BJP seems to be finding that for a country which wants its global presence recognized, its home politics is a hurdle. No one cares what Pakistan does but India is not Pakistan internationally. A reality India doesn't want to accept.
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