Inflation targeting worked very well, says RBI governor

INDIA'S FLEXIBLE INFLATION targeting framework has worked “very well”, Reserve Bank of India (RBI) governor Sanjay Malhotra said on Friday, amid an ongoing review of the 4% target with a tolerance band of +/-2% adopted in 2016.

- FE BUREAUS

Speaking at Kautilya Economic Conclave 2025 in Delhi, he said,‘..it’s the government which sets the target, not the RBI for itself. The RBI is consulted (on the target) every five years.”

The governor made it clear that when it comes to setting the target, the RBI has no independence, but “only a view,” which is communicated to the government.

“India has done very well in giving the Reserve Bank of India, its central bank, the independence where it's required, but with accountability features built into it,” the governor said.

Only in the third lever of the framework is how to align the operating target to the policy repo rate, where there is complete flexibility or independence to the central bank, Malhotra said.