Investors are hoping India's Prime Minister Manmohan Singh, whose radical reforms transformed the country's economy two decades ago, can work his magic once again after he took charge of the finance ministry. (Prakash Singh/AFP/Getty Images)

It is a moment tailor-made for Indian Prime Minister Manmohan Singh. The Indian economy is a mess, and the ruling Congress party’s fortunes are in even worse shape. Party leaders have finally realized that if they do nothing to reenergize the economy, they will face defeat at the next general election, in 2014.

Step forward the man who championed the liberalization of India’s economy in 1991, pushing through economic reforms that unleashed the country’s private sector and set the stage for two decades of rapid economic expansion.

Despite being elected to a second term in 2009, Singh has seemed like a broken man in recent years, party colleagues and observers say, unable or unwilling to champion a second wave of economic changes in the face of opposition from within his own party and from other members of his ruling coalition.

His inability to stem the corruption that seemed to be taking place around him, or even to speak out convincingly against it, made him an object of ridicule. His legacy as the father of India’s economic reforms seemed irreversibly tarnished.

But fate has thrown this shy, soft-spoken man one last chance to redeem himself. The country’s longtime finance minister, Pranab Mukherjee, whose last budget in February had dismayed foreign investors, resigned last week to contest the presidency, a largely figurehead role chosen by an electoral college of members of Parliament and state legislators.

As a result, Singh has taken charge of the Finance Ministry. He is talking of rolling back or softening some of Mukherjee’s most controversial tax policies affecting foreign investors.

Singh urged ministry officials to “reverse the climate of pessimism” and “revive the animal spirits in the country’s economy,” a call for action whose success or failure is likely to define his record as prime minister.

Montek Singh Ahluwalia, the deputy chairman of the Planning Commission and one of Singh’s confidants, said in an interview that changes to allow more foreign investment in the retail and aviation sectors should be pushed through, as well as efforts to remove bottlenecks in the power sector that are undermining growth and investor sentiment.

What gives some people hope that Singh could succeed is the expansion of his coalition government in recent weeks. That means West Bengal Chief Minister Mamata Banerjee no longer holds the balance of power and will be less able to block economic changes.

Just as important, though, is the mood within the Congress party, and the support of powerful party leader Sonia Gandhi, who has been lukewarm about economic reforms in the past.

“Across the party, there is now a realization that if you need to return to the high economic growth rates that were there from 2004 to 2008, we have to go for the second-generation reforms,” said one Congress leader, speaking on the condition of anonymity to discuss sensitive party matters. “We have to rescue the economy from the ravages of Pranab Mukherjee.”

Nevertheless, there is considerable doubt that Singh has the energy or determination to achieve much.

Indeed, the Economic Times said Singh cannot escape blame for the budget, or for the slide in economic growth to just over 5 percent in the most recent quarter, from 8 percent just a few years ago.

“The Prime Minister needs to live up to his credentials; but don’t expect miracles,” the newspaper wrote.

Rama Lakshmi contributed to this report.