RBI Governor Indicates Potential Reduction of Inflation Target
At the Financial Congress of the Bank of Russia, RBI Governor Sanjay Malhotra told Russian Central Bank Governor Elvira Nabiullina that India is unlikely to raise its official inflation target and may contemplate lowering it over the long term. He highlighted that the existing inflation‑targeting framework, introduced in 2016, obliges the Reserve Bank of India to keep headline consumer‑price inflation within a government‑set band.
In March, the government reaffirmed the retail inflation target at 4%, with a tolerance band of 2%‑6%, and announced that this target will remain in force for the next five years. Malhotra emphasized that, given the comparatively lower inflation targets adopted by advanced economies, there could be justification for India to reduce its target in the future.
He noted that while inflation is projected to rise, it currently stays below the central bank’s target. Retail inflation recorded 3.93% in May, and the economy expanded 7.8% year‑on‑year in the quarter ended March. Data for June retail inflation has not yet been released.