RBI Releases Paper on Flexible Inflation Targeting Review

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  • Last Updated on 23 August, 2025

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Flexible inflation targeting framework RBI

Press Release: 2025-2026/951; Dated: 21.08.2025

1. RBI Releases Discussion Paper on Inflation Targeting

The Reserve Bank of India (RBI) has published a Discussion Paper on the review of the flexible inflation targeting (FIT) framework, as mandated under the RBI Act, 1934. This move is part of the statutory requirement for a periodic review of India’s monetary policy framework to ensure its effectiveness in maintaining price stability while supporting economic growth. The paper has been made publicly available on the RBI’s official website for wider consultation.

2. Background of the Framework

The flexible inflation targeting framework was first introduced in August 2016, when the government notified an inflation target with a tolerance band for the period 2016–2021. This was a landmark shift in India’s monetary policy approach, focusing on price stability as the primary goal of the RBI while allowing flexibility to support growth. In March 2021, the framework was retained for the subsequent five-year period from 2021–2026, reaffirming its relevance in anchoring inflation expectations.

3. Upcoming Second Review

As per the provisions of the RBI Act, a review of the inflation targeting framework is required every five years. The second review is due by March 2026, making the current discussion paper a critical step in evaluating the framework’s performance over the past decade. The paper examines the effectiveness of the inflation targeting mechanism, its impact on growth and financial stability, and potential refinements required to align with evolving macroeconomic conditions in India and globally.

4. Call for Public Comments

In order to foster transparency and participatory policymaking, the RBI has invited comments and suggestions from stakeholders, experts, and the general public on the discussion paper. Inputs may be submitted via email until September 18, 2025. These contributions will help the RBI and the Government of India in shaping the future course of monetary policy design and ensuring that the inflation targeting framework remains robust, credible, and responsive to India’s dynamic economic environment.

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied