India’s flexible inflation-targeting framework has worked “very well,” Reserve Bank of India governor Sanjay Malhotra said on Friday, amid an ongoing review of the 4% target with a tolerance band of +/-2% adopted in 2016.

Speaking at Kautilya Economic Conclave 2025 in Delhi, he said, “…it’s the government which sets the target, not the RBI for itself. The RBI is consulted (on the target) every five years.” The governor made it clear that when it comes to setting the target, the RBI has no independence, but “only a view,” which is communicated to the government.

Balancing Central Bank independence with accountability

“India has done very well in giving the Reserve Bank of India, its central bank, the independence where it’s required, but with accountability features built into it,” the

See Full Page