The fiscal deficit could go haywire and the runaway international oil prices could make another domestic oil price rise inevitable, with all the attendant trauma.
Chidambaram ended the inaugural session of the annual economic editors conference here with an exhortation to the gathered scribes to spread the message of confidence. Tell the people to simply go out and buy. There are inventories with manufacturers and enough money in circulation. As evidence, he cited the 11th standard school girl who had rushed up to the stage during the Michael Jackson show, having spent Rs 5,000 to buy a ticket.
The finance minister sought to boost confidence as the nation prepared to celebrate Dipawali and Pongal because the fundamentals were right, placing India on a sure footing on the 6.5 per cent growth path, a percentage more than the rate achieved in the 1980s and nearly twice the Hindu growth rate. The final growth figure for last year was 6.6 per cent and the likely figure for the current year is 6.5 per cent.
One positive fundamental was foreign investment, going at a much faster clip this year than the last.
Another was the price level which Chidambaram expected in the current year to average at 6-7 per cent, less than last years average of 8 per cent and well within the secular inflation rate of 6-8 per cent.
The point-to-point inflation rate had risen from the low 4.5 per cent because of the oil price rise which was a correction and the high prices of wheat because of the low harvest last year. This could well be corrected in the current year if the rabi harvest kept pace with the kharif.
Confidence was also based on the determination to keep the growth in the money supply within 16 per cent and the unlikelihood of interest rates being jacked up by the governments borrowing requirements. With three-fourths of the governments borrowing programme for the current year over, there was no chance of the rest of the borrowing programme for the current year nudging up interest rates. That would cheer business indeed.
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But Chidambaram was altogether more circumspect while talking about the fiscal deficit. The bonus payments of the public sector units were to come out of their budgetary allocations and some provisions had been made for the award of the Fifth Pay Commission.
But on the crucial question as to whether the fiscal target would be met, he said we would try our very best to stick to revenue and expenditure targets. Why should I throw in the towel at this stage? he uttered twice. No firm commitment that the target will be met.
Most of the officials faces were the same from the Manmohan Singh era but there was a world of difference in the mandate that Manmohan Singh and Chidambaram himself had in the years of the previous regime and the mandate that Chidam-baram had in a coalition government. There had to be a consensus on subsidies and you had to carry everyone along in dismantling administered prices in the oil sector so went the refrain.
But the greatest imponderable over which Chidambaram had no control and the consequences of which could blot his copybook were international oil prices. When they were raised with the expectation that the deficit in the oil pool account would be reined in, an import bill of $7.8 billion was foreseen for the year.
The international expert prediction then was that oil prices would not go beyond $17.5 per barrel. And then the US fired those missiles on Iraq and oil prices are now $6 above that absolute earlier ceiling.
To make matters worse, the domestic oil output will be about 10 per cent down on last year even as oil consumption keeps skyrocketing.
The oil pool account deficit was not forthcoming and while only the cabinet could clear a further price rise, nobody was betting on the opposite.
All of which left Chidambaram with having to take the credit for sticking to the timetable that he had set for publishing this white paper or introducing that bill in Parliament.