Inflation Targeting Framework in India
India adopted a flexible inflation targeting (FIT) framework in 2016, with the amendment to the RBI Act. The framework made price stability — specifically CPI inflation of 4% — the primary objective of monetary policy, while keeping growth as a secondary objective. This was a paradigm shift from the earlier "multiple indicator approach" where the RBI balanced multiple objectives without a clear hierarchy.
- The inflation target is set by the Central Government in consultation with the RBI every five years.
- CPI (Consumer Price Index) — combined for rural and urban — is the official measure used.
- The tolerance band of ±2% around the 4% target (i.e., 2%–6%) allows for real-world flexibility.
- India's FIT framework is "flexible" because growth is also considered (unlike a "strict" targeting regime that ignores output).
- The Urjit Patel Committee (2014) recommended the FIT framework, which was subsequently adopted.
● Tracked since February 06, 2026 · last seen June 12, 2026 · updates as the daily brief publishes
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