In a rare display of unity, Communists joined with right-wing Hindu politicians on 2 August to walk out of parliament. The deadlock has left parliament in a mire as the Congress Party rules by a slim majority and cannot muster enough votes to pass anything.
The opposition parties are angry about the government's refusal to admit any blame in a pounds 1bn securities scandal which led to the Bombay stock market crash of 1992. They want Mr Rao to sack two cabinet ministers and take action against foreign-owned banks - Citibank, Standard Chartered and Deutsche Bank - alleged to have been involved in the fraud.
So far, they have focused their anger on Manmohan Singh, the Finance Minister, who has steered India away from socialism towards a freer economy. He is the key to the success of Mr Rao's government and its Achilles' heel.
Dr Singh apologised over the weekend for his arrogant dismissal of an all-party commission inquiry into the country's biggest financial scandal. The inquiry cleared him of any connivance, but it also chastised him for not halting the securities scam earlier, and for failing to hunt down all the culprits.
His apology failed to persuade opposition leaders to lift their boycott. The protest could run for the rest of the session, paralysing debate on such issues as the next five- year plan and the Muslim separatist uprising in Kashmir.
The 1992 securities fraud wiped out the savings of millions of small shareholders. The failure of Mr Rao's government to convict - or even sack - several top officials implicated in the scandal has eroded much of the goodwill that he earned for bringing a measure of political stability and prosperity to India. A corruption charge brought down the last Congress government of Rajiv Gandhi in 1989, and Mr Rao is keen to prevent it happening again.
There are limits to how far the opposition parties can push. Mr Rao could spring early elections on them, probably this winter.