The present Flexible Inflation Targeting (FIT) framework in India as a mandate for monetary policy to manage inflation at 4% (+/-) 2% is ending in March 2026 and is under review. In this regard the Reserve Bank of India (RBI) has brought out a well-researched discussion paper, and has several questions for which views have been sought. Here, this article addresses three questions: headline versus core (excluding food), acceptable level of inflation, and inflation band.

Controlling inflation

Before responding to these questions, it is pertinent to highlight that inflation control by itself is an important objective of monetary policy. High inflation, above a tolerable level, is a regressive consumption tax that affects poorer households more disproportionately than the rich and households

See Full Page