The bearded guru, named Chandraswami, is often referred to as Mr Rao's Rasputin. In his ornate mansion on the outskirts of New Delhi, Chandraswami holds court sitting on a large tiger-skin. Cabinet ministers and the country's top policemen come reverentially to touch his manicured feet. His reputed spiritual powers have also made him a confidant of Elizabeth Taylor, Adnan Khashoggi, the Sultan of Brunei and the presidents of Kenya and Zambia.
The guru was known in Britain for meddling in the Harrods takeover battle between the Fayed brothers and Lonrho's chief, Tiny Rowland, and he was often seen on the yacht of Mr Khashoggi the Saudi entrepreneur.
It is doubtful that Chandraswami's wizardry can make the charges against him simply vanish in a puff of smoke. A former cabinet minister, Arif Mohammed Khan, claims that the swami also tried to recruit an Israeli mercenary to have Rajiv Gandhi killed during the 1991 election campaign. Gandhi was assassinated but the main suspects are Sri Lankan Tamils. Now the Prime Minister's guru has been summoned to appear before the commission that is investigating Gandhi's killing.
Chandraswami denies giving sanctuary to a gang leader who killed a senior police officer. The swami also laughs off Mr Khan's charges that he tried to a hire a gunman for pounds 640,000 to kill Gandhi.
The Prime Minister is not alone in relying on a swami. Many Indian politicians have their favourite astrologers and soothsayers. Some go to get kicked in the head - as a blessing - by a silent guru perched in a tree. Still others prostrate themselves in front of a pair of shoes belonging to a particular sadhu, or holy man.
A columnist, Saeed Naqvi, said: "The Prime Minister ... is entitled to his private faith in the godman, but when this faith spills over into the domain of public life, the state apparatus is paralysed."
The Internal Security Minister, Rajesh Pilot, who ordered the guru's arrest, was immediately elbowed out of office by the Prime Minister. Mr Pilot is now lost in the political wilderness, having been given the post of Minister for Forests. Yet he is unrepentant: "If power-brokers and people having links with criminals are not checked and punished in time, the future of democracy in our country looks bleak." Many Congress MPs have pledged their support for Mr Pilot's crusade against the powerful guru.
Mr Rao already faces a growing revolt within the Congress party, and this scandal is likely to harm its chances of re-election early next year. If the swami manages to evade the charges now piling up against him, Mr Pilot claims that as the new forestry and wildlife minister, he will at least try to have Chandraswami arrested for illegally owning a tiger-skin rug.