Evaluate how far India's flexible inflation targeting framework has delivered price stability without giving up growth.

In 2016, an amendment to the RBI Act, 1934 gave India a statutory flexible inflation targeting (FIT) framework. It set a target of 4% CPI inflation with a ±2% band, and a six-member Monetary Policy Committee (MPC) decides the policy rate [1]. The Centre has kept this target until March 2031 [2], which shows confidence in the framework. On balance, FIT has largely delivered price stability while keeping growth intact. Its main weakness is supply-driven inflation.

Price stability: largely delivered

• Credibility and anchored expectations: keeping the same target twice gives households and firms a fixed reference point for prices [2].
• Low inflation recently: CPI inflation stayed below target for 16 consecutive months before rising to 4.4% in June 2026 [3].
• Transparency and accountability: the MPC votes and publishes its minutes [4]. Under Section 45ZN, the RBI must explain to the Government in writing if it misses the band for three quarters in a row [1].

Growth: protected by the "flexible" design

• Growth is part of the mandate: the RBI targets inflation "while keeping in mind the objective of growth" [1].
• Price control with high growth: for 2026-27, the RBI projected 6.7% GDP growth alongside 5.0% CPI inflation [3].
• Responsive policy: in August 2026 the MPC held the repo rate at 5.25% by a unanimous vote and kept a neutral stance. It did not tighten too early [3].

Limitations

• A blunt tool against supply shocks: in October 2026 the repo rate was raised to 5.5% in response to a rise in energy and food prices [5]. Headline inflation is expected to average about 5.8%, while core inflation is projected at only 4.4% [5]. Interest rates cannot add to the supply of oil or food.
• Cost to growth: tightening while growth is described as "resilient" makes credit dearer for MSMEs and households [5].
• Timing risk: CPI was projected to peak at 5.9% in Q3 [3]. Transmission lags mean the hike may reach borrowers only after that peak.
• Little headroom: a 5.8% average sits just below the 6% upper limit [5].

Overall, FIT has made monetary policy predictable and kept inflation mostly within the band without hurting growth. Its weak point is food and fuel shocks. The best way forward is to pair it with supply-side measures: buffer stocks, better food supply chains and calibrated fuel taxes. Moving in small, data-dependent steps also helps. Together, these would let FIT keep delivering stable prices alongside growth, in line with SDG 8.