Inflation Targeting Framework
India's Flexible Inflation Targeting (FIT)
India adopted Flexible Inflation Targeting (FIT) in 2016 through an amendment to the RBI Act. Under FIT, the Central Government sets the inflation target (in consultation with RBI) and the MPC uses the repo rate to achieve it. "Flexible" means the RBI can take into account growth considerations while targeting inflation, unlike rigid targeting.
- Legal basis: RBI Act Section 45ZA — Central Government shall set the inflation target every 5 years in consultation with RBI.
- Current target: 4% CPI inflation ± 2% tolerance band (2–6%), set for the period 2021–2026 (subsequently renewed).
- The MPC must publish a report explaining its actions if inflation remains outside the tolerance band for three consecutive quarters — an "accountability mechanism."
- Urjit Patel Committee (2014): recommended adopting a CPI-based inflation target (as opposed to WPI), establishing the MPC, and using the repo rate as the sole policy rate — all adopted through the 2016 amendments.
- CPI projection FY27: 4.6% headline; core CPI: 4.4% — above target but within tolerance band.
● Tracked since February 12, 2026 · last seen June 22, 2026 · updates as the daily brief publishes
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