India is likely to retain its existing inflation target of 4% for the Reserve Bank of India (RBI), according to a Bloomberg News report published on January 5, 2026. Citing finance ministry officials familiar with the matter, the report suggests that the current inflation-targeting framework is viewed as effective in managing prices.
The flexible inflation targeting framework, which mandates a 4% headline inflation target within a tolerance band of 2% to 6%, is set for review in March. The RBI's target is set every five years, and the current term is coming to an end.
Since its implementation in 2016, the inflation-targeting framework has been credited with helping to manage price volatility, even through challenging periods marked by global geopolitical events and supply chain disruptions. Finance ministry officials believe the established framework has served its purpose effectively in keeping price pressures contained over the medium term.
The government has sought the RBI's input, and internal deliberations suggest a preference for continuity. The inflation target serves as a crucial guide for the Reserve Bank of India's monetary policy decisions.
India adopted the inflation-targeting framework and formally tasked the central bank with it in 2016 and it was last renewed in 2021. Over the past decade, inflation has stayed within the mandated band for roughly three-quarters of the time, with volatility peaking during the pandemic years.
India's retail inflation rose to 0.71% in November 2025, climbing from a record low of 0.25% in October 2025. Despite the increase, inflation remained below the Reserve Bank of India's lower tolerance threshold of 2% for the third consecutive month. The Ministry of Statistics and Programme Implementation reported these figures.
The annual inflation rate in India was 4.95% in 2024, a 0.7% decrease from 2023. The Reserve Bank of India (RBI) expects inflation, as measured by the Consumer Price Index (CPI), to average around 3.7% for the financial year 2025–26.
The government is preparing to revamp the monetary policy mandate for targeting retail inflation in 2026. CPI, or headline inflation, started declining in November 2024 and remained in the Reserve Bank's comfort zone (2-4%) until June 2025. Thereafter, it slipped below 2%.
The decision to retain the 4% inflation target signals a continuation of India's monetary policy stance. This stability in policy objective aims to provide predictability for markets and businesses.
