He graduated from St. Stephen's College, Delhi, University of Delhi. Thereafter, as a Rhodes Scholar, he went on to study at Balliol College, University of Oxford, where he obtained a B. Phil and a D. Phil in Economics. His 1974 doctoral thesis was titled "India’s exports and export policies in the sixties" under the supervision of Mr P P Streeten.

His academic career has been interspersed with short periods in the government. He was in the Indian Administrative Service. For some time, he worked as Economic Adviser in the Ministry of Commerce. Later, he was Chief Economic Adviser to the Government of India and Secretary in the Ministry of Finance.

Professor Nayyar is an Honorary Fellow of Balliol College, Oxford. And he is Chairman of Sameeksha Trust, which publishes Economic and Political Weekly. He served as Chairman of the Board of Governors of the World Institute for Development Economics Research, UNU-WIDER, Helsinki, from 2001 to 2008 and Vice President of the International Association of Universities, Paris, from 2004 to 2008. He was on the Board of Directors of the Social Science Research Council in the United States from 2001 to 2007 and was Chairman of the Advisory Council for the Department of International Development, Queen Elizabeth House, University of Oxford, from 2004 to 2007 , . He has received the VKRV Rao award for his contribution to research in Economics. He has been President of the Indian Economic Association. He is also on the Editorial Board of several professional journals.

He has served as a member of many commissions, committees and boards: both national and international. He is a member of the National Knowledge Commission in India. He is a member of the Board of the South Centre, Geneva. He has been a Member of the World Commission on the Social Dimension of Globalization. He has served as a Director on several corporate boards, including State Trading Corporation of India, State Bank of India, Export-Import Bank of India and Maruti Udyog. At present, he is a Director on the Boards of the SAIL and ICRA.

His research interests are primarily in the areas of international economics, macroeconomics and development economics. He has published papers and books on a wide range of subjects, including trade policies, industrialization strategies, macroeconomic stabilization, structural adjustment, economic liberalization, trade theory, macro policies, international migration and the multilateral trading system. In addition, he has written extensively on economic development in India. Globalization and development is an area of focus in his present research .

Professor Nayyar has published more than 50 papers in academic journals. He is the author, co-author or editor of 12 books, which include: India’s Exports and Export Policies (Cambridge University Press, 1976 and 2008), Migration, Remittances and Capital Flows (Oxford University Press, 1994), The Intelligent Person’s Guide to Liberalization (Penguin Books, 1996), Trade and Industrialization (Oxford University Press, 1998), Governing Globalization: Issues and Institutions (Oxford University Press, 2002), Stability with Growth: Macroeconomics, Liberalization and Development (Oxford University Press, 2006) Trade and Globalization (Oxford University Press, 2008) Liberalization and Development (Oxford University Press, 2008).