India Retains RBI's 4% Inflation Target for Next Five Years

• Indian government renews RBI's inflation mandate, keeping the retail inflation target at 4% with a 2% tolerance band for another five years until March 2031.
• This decision means the upper limit remains at 6% and the lower limit at 2%, marking the second consecutive time the target has been retained unchanged since 2016.
• India adopted inflation targeting in 2016, tasking the RBI's Monetary Policy Committee with managing price rises, using the 4% target as an anchor for interest rate decisions.
• The framework has largely kept inflation within the mandated band over the past decade, except during the Covid pandemic and the Russia-Ukraine conflict.
• Latest retail inflation in India was 3.21% in February, up from 2.74% in January, both within the target band, based on a new Consumer Price Index series with a 2024 base year.