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Replying to Australia`s 333 runs, the visitors lost eight wickets within 68 runs to be bundled out for 282 in their first innings before the bowlers led by the young Umesh Yadav brought them back in the match.
Australia were 179 for 8 in their second knock, leading India by 230 runs on a day when 15 wickets fell on what appears to be a difficult yet not an impossible MCG pitch. Importantly for the hosts, under-fire veteran Michael Hussey (79) was still holding his ground though fortuitously since Rahul Dravid at first slip dropped a sitter off him when the left-hander was on 69.
Hussey, the highest scorer of the match so far, has now batted for 197 minutes and 134 balls and hit seven fours during the course of his fighting knock that has kept Australia in the hunt after yet another top-order batting collapse.
With two full days left in the game, India will look to restrict Australia`s lead to under-250 and push for victory while the hosts will also fancy their chances.
Umesh was the pick of Indian bowlers with 4 for 49 but no less significant was Zaheer Khan`s twin strikes off successive overs in the final session and the good support which Ishant Sharma and off-spinner Ravichandran Ashwin provided.
The hosts were precariously placed at 27 for four at one stage before former captain Ricky Ponting (60) and Hussey pulled things back with a 115-run fifth-wicket partnership.
India resumed the day on 214 for 3 but added only 68 runs before losing the final seven wickets today. Returning fast bowler Ben Hilfenhaus bagged his first five-wicket haul in Tests, 5 for 75, to shore up the Australian spirits.
But India didn`t allow themselves to be overwhelmed by morning`s collapse and punched holes in Australia`s top order to have them reeling at 27 for 4. The Australian camp shook with tremor after they lost their first three wickets to Umesh, the young speedster playing his third Test. Zaheer again had the alarm bells ringing by accounting for Ponting and Brad Haddin (6) in successive overs during the final hour of the day`s play.
Umesh sent tremors through the Australian strikes by removing openers David Warner (5) and Ed Cowan (8) in his fourth over with the score being only 13 on the board. Warner aimed a cut at a Yadav delivery without much footwork and dragged the ball on to his stumps while Cowan shouldered arm to an incoming delivery and was rightly judged leg before wicket.
The shock in Australian ranks was still not over before Shaun Marsh (3) made a similar mistake to Umesh, staying rooted to his spot and edging a drive on to his stumps.
Skipper Michael Clarke then received a beautiful in-cutter from Ishant Sharma which he edged on to his stumps.
Australia needed strong and experienced hands to calm nerves and Ponting and Hussey were at hand to respond to the call.
Hussey, on a king`s pair, drove the first ball he faced from Sharma to midwicket for three and from then on seized the initiative for his team.
He flicked and then hooked Umesh imperiously for fours and later gloriously straight-drove Ishant and cut Zaheer for fours.
Ponting was similarly assured at the other end and a straight-driven four of Ishant was the pick of his shots in the afternoon.
Australia took the tea at 81 for 4 and continued the good work on resumption, raising 100 runs for the partnership from only 106 minutes of batting.
Ponting was the first one to reach his half century, gliding Ishant for a four in the point region, having faced 84 balls and hit three fours.
Hussey reached the landmark soon enough when he thrust Ashwin off his pads into the midwicket region for three runs, having faced 73 balls and hit five fours.
With the game slipping out of India`s grasp, skipper Mahendra Singh Dhoni fell back to his most experienced bowler and Zaheer proved true to expectation.
The second delivery from the left-arm paceman slid off the face of Ponting`s bat and was caught coolly by Virender Sehwag at gully. Next over, a tentative Haddin edged Zaheer to second slip for six runs, leaving Australia down to 148 for six.
The next big moment for India came in the final half hour when Ashwin, who bowled beautifully all afternoon, drew Hussey forward and found the edge of his bat but the easy chance was floored in the slip by Rahul Dravid. The left-hander was on 69 and the total read 163 for 6.
At the same total though a wicket fell from the other end when Peter Siddle edged an Umesh delivery to a diving Dhoni in front of the first slip.
Ashwin was rewarded for his hard work when he bowled his `carom` delivery and caught Nathan Lyon (0) plumb in front of stumps.
