Critically evaluate the effectiveness of the Flexible Inflation Targeting framework in India since its adoption in 2016.

Flexible Inflation Targeting (FIT), adopted through the 2016 amendment to the RBI Act, 1934, committed the Reserve Bank to a 4% CPI target with a +/- 2% band, enforced by a six-member Monetary Policy Committee. A decade on, FIT has succeeded institutionally but is now being tested by supply-driven inflation and a shrinking real rate cushion.

Where FIT has worked

• Rule-based credibility: a statutory numerical target replaced discretionary "multiple indicator" policy, ending the double-digit inflation of the early 2010s.
• Inflation within the band: even during the current upturn, August 2026 CPI of 4.82% remains inside the tolerance band [2].
• Contained core inflation: core at about 4.2%, marginally below the RBI's own projection of 4.3%, shows price pressure has not yet generalised beyond food and fuel [1][2].
• Transparency: published MPC minutes, recorded votes and bi-monthly projections have improved forward guidance and market anchoring [1].

Where it falls short

• Supply shocks dominate a CPI target: food inflation at 5.95% against headline 4.82% means the index is driven by harvests, not credit demand — which the repo rate cannot address [2].
• Delayed response risks de-anchoring: inflation has exceeded 4% for three consecutive months while the stance stayed neutral, even as the RBI itself projects Q3 FY27 CPI at 5.9% [1][2].
• Squeeze on savers: with the repo rate at 5.25% and expected inflation converging towards it, the ex-ante real rate nears zero, reviving the shift into gold and property that the RBI's Household Finance Committee (2017) identified as a structural weakness [1][4].
• Measurement discontinuity: the CPI rebasing to 2024=100 with HCES 2023-24 weights alters the very basket the 4% target was framed against [3].

FIT has therefore delivered institutional discipline but incomplete price stability. Strengthening deposit-side transmission, timely stance changes ahead of rate action, and a linked CPI back-series would let the framework's next five-yearly review consolidate, rather than dilute, its hard-won credibility.