Economic Affairs Secretary R Gopalan indicated the government's finances could go awry if there was a bad monsoon and global crude prices continued to remain high. He said these two factors would play a key role in determining the fiscal deficit.
"The finance minister had told very clearly that if the international oil situation remains the same as it is today and if the monsoon is not going to be responsive, obviously numbers will have to undergo a change," Gopalan told reporters on the sidelines of a conference by industry chamber Ficci.
The India Meteorological Department has forecast that the country is expected to receive normal monsoon rains this year.
The government has pegged the fiscal deficit for the current financial year at 4.6 per cent of the Gross Domestic Product (GDP).
A recent Goldman Sachs report, however, said India's fiscal deficit was likely to be 5.2 per cent of the GDP in 2011-12.
Gopalan said the government would try to stick to the fiscal deficit target set in the Budget 2011-12.
"We will certainly maintain fiscal deficit as much as we have prescribed," he said.
In its credit policy statement earlier this month, the Reserve Bank of India had also expressed concerns that if domestic retail prices of petrol and diesel were not aligned with international market, the fiscal deficit would widen, and this would counter the steps taken to moderate demand and arrest inflation.
Global crude prices have soared above $120 a barrel as supplies from Libya, a key exporter, have dried up due to the ongoing political unrest there.
While petrol prices have been freed from government control, price of diesel continues to remain regulated.
From touching a 34-month high of $121.90 a barrel on April 28, the Indian basket of crude has slipped close to eight per cent to $112.46 on May 10.
For the current month so far, the basket has averaged $113.27 a barrel compared to $118.46 a barrel in April.
Finance Minister Pranab Mukherjee has already said any further rise in crude oil prices might pull down India's economic growth to eight per cent in 2011-12 from a projected nine per cent as the central bank raised policy rates for the ninth time in just over a year to tame inflation.
