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The 22-year-old from Almora squandered a one-game advantage as world number 7 Lee found his attack just in time to register a 13-21, 21-16, 21-11 win to secure the bronze.
His loss means that it would be the first time in 12 years that India will return without a badminton medal from the Olympics.
However, the youngster did get a first against his name in his maiden Games appearance.
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