The Reserve Bank of India (RBI) Act, 1934 was amended In May 2016 to provide a statutory basis for the implementation of the flexible inflation-targeting framework. This amended Act also provides the inflation target to be set by the Government of India, in consultation with the Reserve Bank, once every five years.

The existing inflation targeting framework will run out on March 31, 2021. This means that the government has less than five months to either set a new target or decide to run with the existing range. According to a senior Finance Ministry official: No call has yet to be taken on the new range or to continue with the existing range. Several factors need to be considered before arriving at a new range to be followed from April 1, 2021, or deciding to continue with the existing range.

The Central Government has notified about a 4% Consumer Price Index (CPI) inflation as the target for the period from August 5, 2016, to March 31, 2021, with the upper tolerance limit of 6% and the lower tolerance limit of 2%. However, according to the expert’s opinion, the present range of 4% having a 2% swing in both directions, should be continued accordingly. According to them, events like the pandemic should not influence target resetting.