The belt tightening that was announced with much fanfare in the 2011-12 budget was riddled with sceptical numbers. The math looked incredulous. The budget papers said little on how the gnomes of the Union finance ministry would keep the fiscal deficit from boiling over 4.6% of the gross domestic product.
As detailed in our story on Page 1 today, this confidence is based on assumptions that are not only cheerful, but are also questionable.
Oil prices are known party spoiler as we’ve said repeatedly. But what is getting increasingly clear is their link to the monsoon and elections in the final equation— something that officials never elaborate on. Poor rains and less than happy performance at the hustings will ensure a quick goodbye to any oil price correction. Even one adverse factor (rains or elections) could hit fiscal consolidation—this is hardly the way to set one’s finances in order.