India’s inflation targeting framework has been officially renewed through March 2031. The Government of India issued a Gazette notification on March 25, 2026, retaining the 4 per cent CPI inflation target with a ±2 per cent tolerance band. RBI Deputy Governor Dr. Poonam Gupta outlined the framework’s progress and future direction at a seminar in New Delhi.
A Decade of Inflation Targeting: Key Outcomes
India’s inflation targeting framework has delivered measurable results since its formal adoption in 2016. Average headline CPI inflation fell from 8.1 per cent in the pre-IT decade to 4.6 per cent during 2016–26. Additionally, inflation volatility dropped sharply, with the range narrowing from 3.3–13.4 per cent to just 0.3–7.8 per cent. Meanwhile, GDP growth remained robust, averaging 7.0 per cent annually, excluding COVID-affected years.
India’s inflation performance also improved relative to global peers. In 2025, India’s headline inflation stood at just 2.2 per cent. For comparison, the EMDE average was 5.2 per cent and the world average was 4.1 per cent. Therefore, price stability and growth have proved complementary under this framework, not conflicting.
What the Public Consultation Revealed
The RBI conducted a wide public consultation before the renewal. It published a Discussion Paper in August 2025 and received 75 responses. The consultation covered four key questions: the choice between headline and core inflation, the optimal target rate, the tolerance band width, and point target versus range targeting.
Over 90 per cent of respondents favoured retaining headline CPI as the target. Similarly, strong support emerged for keeping the 4 per cent target and the existing ±2 per cent band. As a result, all core features of India’s inflation targeting framework were preserved. Only 4 out of 56 respondents supported switching to a pure range target.
What This Means for India’s Monetary Policy Going Forward
The renewal of India’s inflation targeting framework arrives during a period of global uncertainty. Geopolitical tensions and supply chain disruptions have made the economic environment harder to predict. However, retaining the proven framework provides both stability and flexibility for the RBI’s Monetary Policy Committee.
Looking ahead to the next review in 2031, Dr. Gupta noted that a sustained period of low inflation and strong growth could support modest tweaks — such as a slightly lower target or a narrower band. For now, however, the existing framework remains the right anchor for India’s monetary policy.
Source: RBI Speeches
