Chidambaram, now in his third stint as finance minister, has robustly defended the Congress-led government's commitment to implement reforms and its ability to revive the once-booming economy.
"He has a lot of experience of the finance ministry," said Rajiv Kumar, secretary general of the Federation of Indian Chambers of Commerce and Industry.
"Industry expects that he will bring back the growth momentum by urgently implementing much-needed reforms."
Chidamabaram, who was home minister until a reshuffle on Tuesday, took over from political troubleshooter Pranab Mukherjee, who quit to become president and whose performance in the finance job was widely criticised.
The 66-year-old politician, who was at the helm when growth was near double-digits, has been keen on reforming India's heavily regulated and state-controlled economy, a legacy of socialist thinking in post-independence India.
"He's the best choice in current circumstances," said Sonam Udasi, research head at Mumbai investment house IDBI Capital, but added the wealthy south Indian politician faced a string of challenges.
Indian stocks were broadly unmoved by the appointment, inching up just 0.12 percent from the previous day.
The economy grew at just 5.3 percent between January and March -- its weakest quarterly pace in nine years -- and recent numbers have been discouraging.
Inflation is at a stubbornly high 7.25 percent, preventing any help by the central bank to cut interest rates to stimulate growth.
India's factory sector activity in July grew at its most sluggish in eight months, according to the HSBC India Manufacturing Purchasing Managers' Index, released Wednesday, underscoring the weakening of Asia's third-biggest economy.
And the monsoon rains, an economic lifeline for India's farmers who are leading producers of rice, sugar, wheat and cotton, have been weak. This threatens to further stoke inflation.
Premier Manmohan Singh's government also has made no significant strides toward scaling back hefty subsidies on food, fuel and fertilisers and cutting its swollen fiscal and current account deficits.
With the stumbling economy and truant rains, there are big divisions about spending cutbacks among the centre-left coalition's members who fear a voter backlash.
Hemen Kapadia, chief executive of investment advisors Chart Pundit, said Chidambaram needed to get the moribund reform process "on track".
But "there are few expectations" of the political veteran, who is known as an occasionally abrasive but energetic minister, he told AFP.
"This government is a failure on all fronts."
Chidambaram got some respite when ratings agency Moody's on Wednesday told Dow Jones News Wires India's Baa3 investment grade rating was safe for now even though it expected the economy to grow just six percent in this fiscal year.
Standard & Poor's in June warned India could be the first of the BRIC emerging economies to lose its investment grade unless it revives growth and spurs reforms.