While some fear that this may upset a lot of assumptions made in the Budget, Jaitley still has a lot of headroom to manoeuvre. For one, the 2015/16 Budget's fuel subsidy projection of Rs 30,000 crore has been made assuming crude oil at $70 a barrel. The current price of $67 - which most experts are already saying is too high and will correct - is still lower than what the Budget assumes.

However, what is a bit more worrying, though manageable, is the rise in the import bill. India imported crude oil worth $138 billion in 2014/15. If this figure rises, trade and current account deficits will widen, pressuring the rupee. Falling rupee is not good for foreign investors as it lowers their returns in dollar terms. Though there is a fear that this may hit plans to attract capital to the country, it may not turn out to be a serious issue. This is because India's current account deficit is well under control. It is projected to be less than one per cent of gross domestic product (GDP) in 2014/15. It was 1.6 per cent in October-December 2014 and two per cent in July-September 2014. These figures, much lower than the scary 4.7 per cent touched in 2012/13, should be well within the comfort zone of foreign investors.

Bank of America Merrill Lynch had, in a report in May, revised the current account deficit forecast to 0.8 per cent of GDP for the current financial year. Its earlier projection was 0.7 per cent. The rise in crude oil prices played a vital role in this change.

However, two areas where rising oil prices may test the government's resolve is subsidy reforms and inflation. It deregulated diesel prices last year. Now, prices of diesel, like that of petrol, follow global trends and are changed without government intervention. This worked fine when crude oil prices were falling.

Now, experts are asking if oil prices rise steeply, will the government continue to pass on the burden to consumers or absorb a part of the increase, effectively rolling back one of its key subsidy reform? Only time will tell, though the government seems to have a better handle on the LPG problem. It has started disbursing subsidies directly to bank accounts of 123 million consumers. The 2014/15 Budget kept Rs 22,000 crore for LPG subsidy. The government is hoping that direct transfer of funds will bring down leakages and reduce its subsidy bill drastically.

In response to the global trend, Indian oil companies have increased petrol prices by Rs 7.09 a litre and diesel by Rs 5.08 a litre in May. If the trend continues, it will start reflecting in the economy's health. Though consumer price inflation fell from 5.3 per cent in March to 4.9 per cent in April, it is likely to spike again if petrol and diesel prices continue to rise. Food prices may also go up as transport costs increase. Back-of-the-envelope calculations indicate that a five per cent change in petrol and diesel prices impacts consumer price inflation by 45 basis points. The Bank of America Merrill Lynch report also indicated that Indian authorities may be confident about keeping inflation below six per cent but oil prices continue to be a threat.

This is especially worrisome in light of the crisis that people are facing in large parts of rural India due to crop damage in recent rains. With the monsoon, too, predicted to be weak, the rural poor will be under a lot of pressure if the country goes through another round of high inflation, testing the government.