P Chidambaram, whose ?dream budget? mesmerised India Inc in 1997-98, is back at the helm in the finance ministry for a third term, likely aided by a new team of seasoned civil servants and technocrats. President Pranab Mukhejee, who had taken over from Chidambaram in the last leg of the UPA-I government as finance minister, on Tuesday appointed the 66-year-old lawyer to his previous job, on the advice of Prime Minister Manmohan Singh, who held the portfolio for a brief while.

A Rashtrapati Bhawan statement said power minister Sushil Kumar Shinde will now hold the home portfolio vacated by Chidambaram, while corporate affairs minister Veerappa Moily will have the additional charge of the power ministry.

Chidambaram?s appointment ? which industry, markets and investors are likely to cheer ? comes at a time when the economy is facing daunting challenges, with the potential growth rate for this fiscal dipping, in the admission of none other than the central bank, to 6.5%.

Chidambaram, who was given the home portfolio after the 2008 Mumbai terror attacks, had presided over the finance ministry during the economic boom years of 2004-08, marked by 9% average growth and an impressive double-digit tax-to-GDP ratio that helped contain the fiscal deficit. Now, he has an uphill task of controlling government expenditure and improving tax receipts at a time industrial growth remains flat and global crude oil price stays stubbornly above $100 a barrel, burning a hole in the government?s coffers. The fiscal deficit for 2012-13 fiscal is budgeted at R5.13 lakh crore or 5.1% of GDP, a target not easy to achieve given the slowdown in the economy, thanks partly to the euro zone travails and the sluggish global economy.

Known for a hands-on work style and no-nonsense approach, Chidambaram?s immediate task will be to drive away the notion of a paralysed government unable to push key reforms necessary to return the economy to a high-growth path. He will have to carry out the mandate of restoring investor interest in the economy and take forward the consultative approach on finalising crucial tax proposals that the Prime Minister initiated after he took charge of the portfolio recently.

GDP growth has hit a nine-year low due to what is perceived as policy inaction, high inflation, high interest rates and global economic uncertainty. Rising subsidy bill has also put India?s investment-grade sovereign debt rating at risk. A light monsoon that has raised the spectre of a drought could put extra burden on the fisc by forcing higher spending.

Arvind Mayaram, an old hand in the finance ministry and currently with the rural development ministry, will take charge on Wednesday as the new secretary in the department of economic affairs (DEA) of the finance ministry. The DEA prepares the Union budget as well as policies on capital market, infrastructure financing and public private partnerships.

The new finance minister is also likely to be assisted by noted economist Raghuram Rajan who is expected to be the new chief economic advisor. Rajan, currently professor of finance at the University of Chicago?s Booth School of Business, will replace Kaushik Basu who demitted office on Tuesday.

Singh recently set up a panel chaired by Partho Shome to finalise the general anti-avoidance rules and another committee led by N Rangachari to finalise the approach for taxation of IT sector as a whole as well as taxation of IT, pharmaceutical, automobile and scientific research and development units in India serving their global parents. Chidambaram also has to take the proposed new direct tax code to its logical end.