India’s 4% Inflation Target Appropriate, No Case to Narrow Band

Speaking in New Delhi, Poonam Gupta, Deputy Governor of the Reserve Bank of India (RBI), said that India’s current inflation target of 4% remains appropriate given the country’s economic profile.

Gupta noted that India’s inflation performance is consistent with economies of similar income levels, size, and structural complexity, and does not stand out as an outlier. “India is in the right company… to be targeting a 4% level of inflation,” she said.

Highlighting long-term trends, she added that average inflation in India has been around 4.5% over the past decade. While inflation did breach the upper tolerance level of 6% during periods of external shocks—such as the COVID-19 pandemic and the Russia-Ukraine War—these were exceptional circumstances.

She emphasized that given the overall stability, there is currently no justification for narrowing the inflation tolerance band, reaffirming the RBI’s stance on maintaining flexibility in monetary policy amid global uncertainties.