Review of inflation target in 2031 only if external shocks muted, growth is more robust, says RBI DG
Indian economy's growth trajectory noting that it has been accelerating slowly over the last 40 years and has become more stable, says Poonam Gupta
- May 5, 2026,
- Updated May 5, 2026 6:11 PM IST
A review of the inflation target of 4% for the monetary policy committee of the Reserve Bank of India (RBI) may be possible in 2031 only if external shocks become more muted and the Indian economy becomes resilient and grows at a much faster pace, RBI Deputy Governor Poonam Gupta said on Tuesday.
“In five years, if external shocks become much more muted, economy becomes even more resilient, it starts growing at much higher rates, then this conversation can be started, and a view can be taken whether 4% is still the right target for us. So, it will take a few things to be worked and to come together for this question to be answered differently,” she said at a seminar by NCAER on India’s inflation targetting framework.
Gupta expressed optimism about the Indian economy’s growth trajectory noting that it has been accelerating slowly over the last 40 years and has become more stable.
“In a bad year, growth numbers are in the range of 5.8-6% and in a good year at 8%,” she said, adding that the band in which now growth moves has narrowed down.
The RBI DG underlined that India's agriculture sector has become very resilient and the GDP had a very large share of services, which has a very stable number.
Further, inflation has eased considerably over the last 10 years when the inflation targetting framework was introduced when there was double digit inflation.
“We are actually entering a period that is relatively more comforting, high growth rate, accelerated growth rate, lower annual variation, low inflation,” Gupta said, adding that if it were not for the external shocks that have been impacted since 2020, India would have reached a stage of high growth of 8% plus.
In such a scenario, if one would have looked at the inflation numbers, then one could have asked if the 4% inflation target is serving the economy well, she noted.
She also noted that it is good policy to continue with the inflation target of 2% to 6% with a central target of 4% as it gives policy credibility and certainty at times of shocks and uncertainty.
On March 25, the finance ministry notified that it has retained the inflation target at 4% with a tolerance band of 2-6% for a period of five years.
India adopted the inflation targeting framework in 2016 and it was previously reviewed in 2021.
A review of the inflation target of 4% for the monetary policy committee of the Reserve Bank of India (RBI) may be possible in 2031 only if external shocks become more muted and the Indian economy becomes resilient and grows at a much faster pace, RBI Deputy Governor Poonam Gupta said on Tuesday.
“In five years, if external shocks become much more muted, economy becomes even more resilient, it starts growing at much higher rates, then this conversation can be started, and a view can be taken whether 4% is still the right target for us. So, it will take a few things to be worked and to come together for this question to be answered differently,” she said at a seminar by NCAER on India’s inflation targetting framework.
Gupta expressed optimism about the Indian economy’s growth trajectory noting that it has been accelerating slowly over the last 40 years and has become more stable.
“In a bad year, growth numbers are in the range of 5.8-6% and in a good year at 8%,” she said, adding that the band in which now growth moves has narrowed down.
The RBI DG underlined that India's agriculture sector has become very resilient and the GDP had a very large share of services, which has a very stable number.
Further, inflation has eased considerably over the last 10 years when the inflation targetting framework was introduced when there was double digit inflation.
“We are actually entering a period that is relatively more comforting, high growth rate, accelerated growth rate, lower annual variation, low inflation,” Gupta said, adding that if it were not for the external shocks that have been impacted since 2020, India would have reached a stage of high growth of 8% plus.
In such a scenario, if one would have looked at the inflation numbers, then one could have asked if the 4% inflation target is serving the economy well, she noted.
She also noted that it is good policy to continue with the inflation target of 2% to 6% with a central target of 4% as it gives policy credibility and certainty at times of shocks and uncertainty.
On March 25, the finance ministry notified that it has retained the inflation target at 4% with a tolerance band of 2-6% for a period of five years.
India adopted the inflation targeting framework in 2016 and it was previously reviewed in 2021.