Inflation Targeting Framework Extended to 2031 at 4% Target
Why in the news
The government retained the inflation target at 4% for the next five years, from 1 April 2026 to 31 March 2031, in consultation with the Reserve Bank of India. It is the second consecutive time the target has been left unchanged.
Key facts
- Period: 1 April 2026 to 31 March 2031.
- Target: 4% retail inflation.
- Tolerance band: 2% lower limit and 6% upper limit.
- Legal basis: Section 45ZA of the RBI Act, 1934.
- Accountability: three consecutive quarters outside the band triggers a report by the RBI to the government on reasons and remedies.
| Parameter | Value |
|---|---|
| Framework | Flexible Inflation Targeting (FIT) |
| Introduced | 2016 |
| Target | 4% |
| Band | 2% to 6% |
| New period | FY 2026-27 to FY 2030-31 |
About the framework
Under Flexible Inflation Targeting, the RBI’s monetary policy aims to keep inflation near a set target. The target is notified by the Centre in consultation with the RBI. Retail inflation was reported at 3.21% for February 2026.
Exam angle
- Remember 4 (+/- 2) and the dates of the new cycle.
- Section 45ZA of the RBI Act sets the target-fixing power.
- Failure means three consecutive quarters outside the 2-6% band.