Summary:
India is likely to renew the RBI’s inflation target unchanged in March
Current framework anchors inflation at 4% within a 2%–6% band
Officials see the system as effective through recent supply shocks
Recent inflation remains below the midpoint, easing policy pressure
RBI feedback favours maintaining the status quo
India is expected to retain its existing inflation-targeting framework, with policymakers seeing little reason to alter a system that has delivered relative price stability over the past decade. According to reporting by Bloomberg (gated), and others, officials familiar with the discussions say the government is inclined to maintain the current mandate for the Reserve Bank of India when it comes up for renewal in March.
Under the framework, the RBI is tasked with keeping headline inflation anchored at 4%, with a tolerance band of 2% to 6%. The target is reviewed every five years and was introduced in 2016 as part of a broader effort to modernise India’s monetary policy regime and improve policy credibility. Since then, it has become the central reference point for interest-rate decisions and forward guidance.
Officials in New Delhi indicate the government sees the existing setup as having worked well, even through periods of significant stress. The framework helped contain price volatility during supply-side shocks linked to global commodity swings, pandemic disruptions and more recent geopolitical events. While inflation has periodically breached the upper end of the band, policymakers view those episodes as largely transitory and supply-driven rather than a failure of the regime itself.
India’s inflation dynamics have recently been relatively benign. Consumer price growth picked up modestly in November from a record low in the prior month but remained comfortably below the 4% midpoint, reinforcing confidence that price pressures are broadly under control. That backdrop has reduced the urgency for any recalibration of the target or tolerance range.
The government has formally consulted the central bank as part of the renewal process. Following internal deliberations and stakeholder engagement, the RBI has reportedly advised maintaining the current framework without material changes. That recommendation appears to align with the finance ministry’s own assessment, suggesting continuity is the most likely outcome.
Retaining the existing target would reinforce policy predictability at a time when India is navigating a delicate balance between sustaining growth and guarding against renewed inflation risks. It would also underline the authorities’ commitment to a rules-based monetary framework that anchors expectations over the medium term, rather than responding reactively to short-term price movements.
