Rethinking India’s Inflation Targeting Framework

As India’s Flexible Inflation Targeting (FIT) framework approaches its March 2026 expiry, the Reserve Bank of India’s discussion paper has reignited debate on what India should target: headline or core inflation, what level of inflation is acceptable, and whether the existing inflation band remains appropriate for macroeconomic stability.

What is the RBI’s Flexible Inflation Targeting (FIT) Framework?

  • The Flexible Inflation Targeting (FIT) framework is India’s formal monetary policy system under which the Reserve Bank of India (RBI) is mandated to maintain inflation at a target level of 4%, with a tolerance band of ±2% (i.e., between 2% and 6%).
  • Introduced ....
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