Iraq-driven oil spike threatens to blow hole in Indian budget

India's government sees oil prices going as high as $120 per barrel for three to four months because of fighting in Iraq, potentially driving a hole of at least Rs 200 billion ($3.4 billion) in the budget, two government sources told Reuters.

"If the oil prices remain high even for 3-4 months around $120

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.