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Andy Mukherjee

India Dodges a Lehman Moment. That Was the Easy Part

Now a government-directed IL&FS board must clean up the shadow lender’s mess.

Uday Kotak in Davos earlier this year: Work to do.

Uday Kotak in Davos earlier this year: Work to do.

Photographer: Simon Dawson/Bloomberg

Even before it went belly up, India’s IL&FS Group was a strange fish: A private infrastructure financier that lent to risky projects it also owned, while throwing around the weight of nonexistent state connections to mask a multiyear liquidity squeeze.

It was only when the creature was dead to the markets that the authorities took note of the risk to Indian finance. As investors were repelled by the lender’s insolvency, New Delhi moved decisively Monday to clean up the mess. Unless the government-supervised rescue comes unstuck for some reason, it’s safe to say that India’s mini-Lehman moment has been averted.