Never before had government decision-making been so unorthodox as it was in those four weeks. And seldom had it been so effective. One of the things all the players remember is how many phone calls they made, and how few files were opened. There was no time for files. There was no time for bureaucratic rules.
Prime Minister Manmohan Singh, his then finance minister, P Chidambaram, and Montek Singh Ahluwalia, then and now, deputy chairman, Planning Commission, were at the top of the informal command structure managing the crisis. Ahluwalia was the one keeping the PM informed most regularly. Chidambaram was the one who sought out good advice from everywhere, including young, sharp economists.
The takeaway is valuable for future crises:
This fascinating story of all the players and all the moves that ensured there were no panic runs in India has two broad lessons. One, stakeholders must cooperate and do so by forgetting precedents when money is at risk. As the latter part of the story shows, this wasn’t the case at the start. There was a group within policy-making circles who didn’t take the crisis seriously enough. How that group lost its argument is a fascinating part of how India avoided a full-blown crisis. The second lesson is that it all boils down to the government in the end. Bankers, businessmen and regulators are crucial. But it is the political appointees who are finally accountable for keeping India’s money safe.