India Stays the Course: Inflation Targeting Framework Extended to 2031

India's inflation targeting framework, aiming for a 4% CPI inflation rate, has been renewed until March 2031. Poonam Gupta supports the target, citing its appropriateness for India's economic conditions. The framework has led to lower inflation volatility and improved policy transparency, fostering better fiscal and monetary coordination.

The Reserve Bank of India's inflation targeting framework has been extended until March 2031, maintaining the 4% target deemed appropriate for the nation's economic situation, said economist Poonam Gupta. The framework, which guides the country's monetary policy, was originally implemented in 2016 and has again been renewed without changes.

Gupta, addressing a forum on inflation targeting, stated that the goal remains fitting for India based on domestic experiences and global practices. She emphasized that the focus on inflation has not hindered economic growth while enhancing transparency and policy credibility across fiscal and monetary bodies.

Feedback from stakeholders and the RBI's research reinforces continued use of the headline Consumer Price Index (CPI) for targeting. Supported by global evidence, the framework has witnessed lower inflation rates and reduced volatility, with the flexibility to adapt to future macroeconomic developments.