The bruising retreat is symptomatic of the flaws of a political system where, over 15 years, coalitions have become the norm.
Now, increasingly potent regional parties that share power can hold the government hostage to their demands.
A bitter partisanship has also emerged between Congress and its main rival, the Bharatiya Janata Party.
The BJP thwarted another reform proposal at a parliamentary committee meeting this week, according to media reports, rejecting a proposal to raise the limit for foreign direct investment in insurance companies to 49 percent from 26 percent.
However, Singh's clumsy handling of the retail reform plan was as much to blame for his failure to get it off the ground.
The decree only needed cabinet approval, which came, but because he chose to push it through when parliament was in session opposition parties saw their chance.
They held the government to ransom by stalling proceedings in both parliamentary houses for 10 days until it was put on hold.
"Manmohan Singh ... doesn't want to go down in history as a reformist prime minister who was helpless in the final conclusion." said Vinod Sharma, who is political editor of the Hindustan Times and close to the Congress party.
"But you have to use a lot of political savvy: they didn't do enough of their political homework, or political strategising."
Image: BJP workers burn an effigy of Prime Minister Manmohan Singh during a protest against the Indian Cabinet's decision to allow more direct foreign investment in the nation's huge retail industry, in New Delhi on December 1, 2011.