RBI Panel May Suggest Retaining Inflation Target

Current Framework Manages Volatility Well

- Anup Roy & Bhaskar Dutta

An internal committee of the Reserve Bank of India (RBI) is in favour of retaining the current inflation target in an upcoming government review, according to sources, giving investors some reassurance about the continuity of monetary policy.

The panel will likely recommend the RBI ask the government to keep the target at 4%, with a tolerance band of 2%-6%, they said. The panel is also in favour of retaining the consumer price index as the target, they said, instead of using a measure that excludes food, as some government officials have argued.

The inflation targeting framework, which has been in place since 2016, has been effective in managing volatility in price gains even during periods of supply shocks triggered by geopolitical events, the people said. The policy is reviewed every five years, with the current framework valid until March 2026.