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RBI to Continue Managing Rates Under Same Inflation Mandate
Inflation: The central government has maintained the retail inflation target at 4% from 2026 to 2031, with a range of 2% to 6%. This decision was taken to provide a stable direction to the RBI's monetary policy. Let's explore the details.
The central government has decided to retain the current retail inflation target of 4% for the next five years. This decision will come into effect on April 1, 2026, and remain in force until March 31, 2031. This announcement has been made by the Department of Economic Affairs, Ministry of Finance, on March 25, 2026.
According to the notification, the inflation target has been set at 4%, with an upper tolerance limit of 6% and a lower limit of 2%. This decision was taken in consultation with the Reserve Bank of India under Section 45ZA of the Reserve Bank of India Act, 1934.
The government has also decided to retain the current mandate of the Reserve Bank of India (RBI). The Monetary Policy Committee (MPC) will continue to determine the policy interest rates in order to maintain the inflation level within the required range.
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India has adopted the inflation targeting framework in the year 2016. In this regard, the MPC has been formed to maintain the inflation level. The initial period was until March 2021, after which the government has continued to maintain this target. This is the second time the government has extended the four percent target unchanged.
Current Inflation Situation
- CPI-based inflation in February 2026: 3.21%
- Rural inflation: 3.37%
- Urban inflation: 3.02%
- Food inflation (CFPI): 3.47%
This means inflation is currently below the target (4%). During this period, prices of vegetables like tomatoes, peas, and cauliflower fell by more than 10 percent, reducing pressure on food inflation. States with the highest inflation in February 2026:
- Telangana
- Rajasthan
- Kerala
- Andhra Pradesh
- West Bengal
According to the government, inflation data is collected from 1,407 urban markets and 1,465 villages across the country. Data was successfully collected from almost all markets in February 2026, maintaining the reliability of the data.
Experts believe that maintaining the 4 percent target signals policy continuity and economic stability. This provides clear direction to the market and investors, while also helping the RBI maintain balance in managing interest rates. Inflation data for March 2026 will be released on April 13, which will determine future monetary policy signals.
