RBI Deputy Governor Poonam Gupta
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The resolution to protect the inflation targeting framework’s core architecture is a policy choice of consequence within the backdrop of geopolitical tensions, provide chain disruptions, vitality worth volatility, and an uneven international progress outlook making the macroeconomic atmosphere extra advanced and fewer predictable, based on RBI Deputy Governor Poonam Gupta.
The Government of India had issued a Gazette notification on March 25, 2026, renewing the present inflation goal of 4 per cent with ±2 per cent tolerance band for 5 extra years, extending the present inflation goal (IT) mandate by way of March 2031.
“Renewal of India’s inflation targeting framework through March 2031, has come at a moment of considerable global uncertainty….The review strengthens the framework precisely when it is most needed,” Gupta mentioned in her speech delivered on Tuesday at NCAER, New Delhi.
She emphasised that the choice to proceed with the present framework is to not be construed as inertia in the direction of change; the framework’s sturdiness over the previous decade displays a willingness to be taught from experiences.
“This begs the question of what might a future review look like?…If growth-inflation mix evolves as it has in the past ten years: robust growth, and lower and more stable inflation, one could perhaps consider tweaking the level of inflation and the tolerance band a bit (keeping in view the international experiences, it would point towards a slightly lower inflation and a slightly narrower band).
“But if the global environment remains as challenging as it has been during the past six years, it would warrant both predictability and flexibility inherent in the existing framework,” Gupta mentioned.
On an ongoing foundation, the RBI too, on its half, can think about some additional refinements, notably with regard to extra engagement on its core inflation measures, she added.
“More, better, and timely communication has been a work in progress and will continue to remain so…The existing monetary policy framework has all the inherent features that can be duly leveraged to nudge the economy towards further improved macroeconomic outcomes,” she mentioned.
“Calibrated refinements, backed by structural changes, if any, can continue to retain the relevance and appropriateness of the framework in the years ahead,” the Deputy Governor mentioned.
Gupta underscored that worth stability and progress have proved complementary fairly than conflicting aims below the Indian IT framework.
“Looking ahead, the structural distinction between the dynamics of headline and core inflation may be becoming less stark,” she added.
“Some evidence shows that Indian agriculture has become more resilient to rainfall shocks; and food prices volatility has moderated especially due to better management and narrowing of demand-supply gaps by the government,” she mentioned.
Besides, with the current revision of the CPI (client worth index) basket by MoSPI (Ministry of Statistics and Programme Implementation), weight of meals in total CPI has declined, which implies headline and core inflation are prone to observe one another extra carefully going ahead.
Thus, the strategies acquired (throughout overview of the IT framework), the expertise of the previous ten years, and the worldwide proof all appear to favour retaining headline inflation because the goal.
Published on May 5, 2026