A not so funny thing happened while the world was watching for an emerging markets crisis to erupt in China. The crisis erupted in India instead.

Contagion typically attacks weak links first, often exposing vulnerabilities hidden in plain sight. The?fall of the rupee exposes India as having the emerging world’s worst fiscal deficit and largest current account deficit in absolute terms.

What went wrong? For much of the past decade, India was celebrated as one of the emerging nations destined to rise indefinitely. Even after the global crisis of 2008, like China and others, it kept growth alive by spending heavily, helped by the easy money flowing out of the US. Behind the scenes, though, the picture was deteriorating, with crony capitalism, government subsidies and inflation rising rapidly.