RBI warns against changing inflation target, says it could backfire
The Reserve Bank of India (RBI) just put out a discussion paper warning that raising the official inflation target beyond 4% could hurt its credibility and undo years of economic progress.
They're asking for public feedback until September 18, and are also rethinking whether to stick with headline or core inflation, if the current 4% goal still makes sense, and if the 2-6% tolerance band needs tweaking.
RBI's current inflation targeting system is up for review in 2026
RBI's flexible inflation targeting system has been around since 2016 and is up for review in April 2026.
The new paper highlights why sticking with headline CPI (like most countries do) is important, especially since food prices can mess with overall inflation trends.
S&P Global even gave RBI a shoutout for keeping things steady so far.
With global uncertainties ahead, RBI wants to keep its framework strong but open to smart updates based on what works best for India now.