Poonam Gupta: Inflation targeting in India - the past, the present and the future
Speech by Dr Poonam Gupta, Deputy Governor of the Reserve Bank of India, at Joint Seminar and Discussion "India's inflation targeting framework' and 'regional economic outlook for Asia and Pacific", National Council of Applied Economic Research (NCAER), New Delhi, 5 May 2026.
It is a pleasure for me to be here at NCAER to speak on India's current monetary policy framework. My remarks focus on how the existing framework has evolved over the past decade, where it stands today, and the issues that may shape its next iteration in five years from now.
As you know, the Government of India issued a Gazette notification on March 25, 2026, renewing the existing inflation target of 4 per cent with ±2 per cent tolerance band for five more years, extending the current inflation target (IT) mandate through March 2031. This renewal, wherein all the features of the framework were retained, invites reflection, not merely on continuity, but also on what a decade of experience has taught us and what refinements, if any, may be warranted in the future.
My remarks are organised as follows. I begin with a brief account of the framework's architecture and a decade of monetary policy decisions and outcomes. I then turn to the public consultation process followed in the latest review, focusing on the four questions that structured it, presenting for each the national and international evidence, and the feedback received. Finally, I will touch on a few issues that may warrant consideration when the framework comes up for its next review in 2031.
1. Framework's architecture and a decade of monetary policy decisions and outcomes
India's monetary policy framework has evolved continuously during the past decades, responding to domestic macroeconomic realities as well as advances in global best practices. The impetus for a more fundamental rethink started to emerge around early 2010s in the context of high inflation that exceeded India's own historical averages and other peer economies, highlighting the need for a strong and explicit nominal anchor for monetary policy. By this time, many countries had successfully implemented inflation targeting and their impacts were broadly assessed to be favourable. India, too, came to regard IT as the appropriate framework to adopt.