There was a movie where two British Pakistani people jokingly called each other 'paki.' IF the word 'paki' is not racist for THEM, it is not racist for me, either. Why should it be? Should I claim to know their culture more than they do?
I spent two years living in a neighbourhood which was 99% Indian/Pakistani/Bangladeshi. I never once heard anybody there calling each other paki. In fact, I'd be willing to bet a very large sum of money that if you went there and started calling people "Paki", you would not be walking out of there. The word is a very strong racial slur in the UK and people as young as ten years old have been up in court for using it source:
Even if all persons hearing the word are white, employers cannot allow people to use it as they have a duty to protect employees from harassment, and a white British employee recently won an Employment Appeal Tribunal (EAT) case of racial harassment against her employer when they failed to act after she reported that a customer had used the word 'Paki' in her hearing, which she regarded as working in an offensive environment.
And it is not just a British thing:
Abuse from British and American customers is driving increasing numbers of Indian call centre workers from their jobs, defeated by the strain of handling persistent rudeness.
Irate customers was cited as one of the main industry stress factors in a recent survey of call centre staff and some organisations have begun employing psychiatrists and counsellors to help employees to cope.
'I've had people tell me, "Back off, Paki, and don't call me again", said Eugene, 27, whose former employer, Spectrumind, provided an accounts services for BT. 'There was a lot of racist abuse once people detected from our accents that we weren't English.
As for the 'IF the word is not racist for THEM, it is not racist for me, either' approach: I regularly hear Afro-American actors and musician referring to other Afro-American as 'n*gger'. But that word is auto-banned here. Isn't that a slight contradiction?