Both Chandra and Nayyar had to explain to the prime minister the consequences of a default. To begin with, the rupee would take a serious knock. There could be a run on major banks. External trade, including vital imports like oil and food, could freeze. India’s global standing would be seriously compromised. India’s hard-earned reputation for reasonably sound macroeconomic management would simply evaporate. Foreign creditors and governments would acquire enormous influence over Indian policy. Many other developing countries had lived through that disempowering experience when a sovereign
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