of 6 percent of GDP.
Financial markets are already expecting the Indian government to overshoot its target and hit around 5.6 percent of GDP, which helped push benchmark 10-year bond yields to the highest in nearly three months late last week.
But the big unknown is the response of the rating agencies, which have repeatedly warned India to get its finances in order.
The agencies are unlikely to reveal their thinking until after Chidambaram unveils his budget in February, analysts said.
But in October, Standard & Poor's said India still faced a one-in-three chance of a downgrade within the next 24 months. Such an outcome would hurt investor sentiment and push up overseas borrowing costs for Indian companies.
Chidambaram, 67, a lanky politician with a disarming smile that belies a sharp tongue and an intolerance for time-wasting, charmed financial markets with his can-do attitude and burst of economic reforms in September, after years of policy inaction by Prime Minister Manmohan Singh's weak coalition government.
India's benchmark BSE index rallied more than 6 percent after the reforms were announced in mid-September. But concerns over implementation, the fiscal deficit and falling foreign fund inflows have since pushed it down 3.3 percent.
We believe that this is the beginning of the realization that a sustainable turnaround in India's growth prospects would require considerable effort, well beyond the burst of measures seen in September, Deutsche Bank said last week in an analyst note headlined Reality Check.
MAN ON A MISSION
Chidambaram's deficit reduction plan banks heavily on raising billions of dollars by auctioning off cellphone airwaves and selling shares in state companies.
Neither effort is going particularly well.
The government raised less than a quarter of its 400 billion rupee ($7.3 billion) target in a 2G spectrum auction in mid-November. A second auction is planned before March, but a senior government official said there would likely be at least a 200 billion rupee shortfall.
India succeeded in raising 8.1 billion rupees ($147 million) by selling shares of state-run Hindustan Copper Ltd on Friday, although the deal was supported by buying from state institutions.
To put the deal in context: New Delhi aims to raise