Mahendra Palsule sums up the consequences of the scrapping of the 1-2-3 agreement:

India will lose its credibility so badly on the world stage, that our ties with countries such as France, Germany, Russia, UK, Japan, and Australia will be affected.[..] If this nuclear deal does not go through, India will permanently accept China as the ruling supremo in the Asian region. The deal is the backbone of a broader strategic alliance not just with the US, but with Japan, Australia, and Russia as well.[...] India will need to learn to bow before China and accept more sophisticated Pakistani infiltration in Kashmir. Today, claims that Arunachal Pradesh belongs to China are being made publicly. Imagine what can happen tomorrow, when no one in the world is going to listen to what India has to say.