It has to do with the history of the word. It was an informal way of saying "Egyptian", which is where they were thought to be from (they actually came from India), and the PC complaint is that it implied foreingness. Not sure if they particularly care.
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Another similar case is with the word "Berber". It's still used, but the endonym "Amazigh" is prefered. It mostly boils down to the fact that they are a group sizable enough to complain about being called an exonym that just mean "barbarian" in Arabic.
End of conversation
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