Clarke, 31, waited until almost time for the toss to make a final decision to miss the fourth and final Test of the trouble riddled series.
Despite being constantly plagued with back troubles throughout his distinguished career, it is the first time the record-breaking batsman and skipper has been forced to miss a Test.
In possibly the most bizarre twist in Australian Test cricket history, Clarke will be replaced as skipper by controversial all-rounder Shane Watson.
The injury-plagued Watson resumed in the Aussie line-up after serving a one-game suspension for team discipline breaches.
Watson, 31, was among four tour party members banned by Clarke and coach Mickey Arthur for the Third Test for failing to complete a written assessment of the team's poor performances after a second straight thumping from India.
Watson has also been roundly criticised by top analysts as well as by teammates for his constant appeal to resume his prefered batting spot as an opener while David Warner and Ed Cowan are Australia's current incumbent starting pair.
It is the first time Watson will lead the nation's Test team and he is not even state captain at New South Wales.
He has led Australia in nine one-day internationals.