Oil spike threatens to blow hole in Budget: Sources

New Delhi: India`s government sees oil prices going as high as USD120 per barrel for three to four months because of fighting in Iraq, potentially driving a hole of at least 200 billion rupees (USD3.4 billion) in the budget, two government sources told Reuters.

"If the oil prices remain high even for 3-4 months around USD120 a barrel, it could have a significant impact on the fiscal deficit and economic growth," a senior Finance Ministry official told Reuters on condition of anonymity.

Finance Minister Arun Jaitley presents his maiden budget next month and faces headwinds from a weak economy, a food inflation scare and now the risk that higher oil prices could swell the government`s oil subsidy bill.