Govt seen unlikely to change RBI inflation target in upcoming revision

RBI has an inflation target set at 4%, with a toleranace band of 2 percentage points on either side. India's inflation rate is currently much below target.

The government is likely to retain the Reserve Bank of India's inflation target, as the existing mechanism is seen as effective in managing inflation in the world's fourth largest economy.

RBI has raised concerns over rising digital fraud cases and unresolved customer complaints across banks. (REUTERS)

The government is unlikely to change the RBI inflation target target, finance ministry officials told Bloomberg, asking not to be identified as the discussions are still private. The Union Ministry of Finance didn't immediately respond to request for comment.

In place since 2016, the RBI's inflation-targeting framework has helped contain price volatility, including during supply shocks triggered by geopolitical events. The central bank currently aims to keep inflation anchored around 4% — the mid-point of a 2%-6% range mandated by the government. The target for the central bank is set every five years and is due in March.

India's inflation rate has dipped below RBI's tolerance band. (Bloomberg/HT)

India’s inflation rate picked up in November from a record low in the previous month but stayed well below the central bank’s 4% target.

The government has also sought the central bank’s feedback, which has favored maintaining the status quo following internal deliberations and consultations with stakeholders, the people said.

The target guides the central bank’s interest-rate decisions, helping keep price pressures within the band and anchored around the mid-point over the medium term.