Why changing inflation target is fraught with risks for RBI's future policy

The RBI has sought views on four key inflation-targeting issues. Maintaining the status quo is recommended, with the focus on creating conditions to consistently achieve the existing 4% target

The Reserve Bank of India (RBI) recently released a discussion paper (DP) setting out four key issues for public feedback on the numerical inflation target, which is due for review in March 2026. The issues are — whether to target headline or core inflation; the optimality of the 4 per cent inflation target; the tolerance band of +/- 2 per cent around the target; and whether to maintain a central target with a tolerance band or shift to a target range. The paper is well researched and follows a balanced approach to put all the four issues in