The Reserve Bank of India (RBI) has said that the flexible inflation argeting (fit) framework has worked well since the introduction and has served the needs of the country, even in difficult times. In a recent report, the RBI emphasized that the fit framework, which was introduced to maintain inflation in the country, has broadly carried out in terms of price stability.
According to the report, from the start of the framework until the end of 2019, inflation in India remained low and stable, on average around 4 percent. It stated: “The experience of the fit framework, introduced in 2016 and first rated in 2021, was broadly implemented.”
However, the report pointed out that the behavior of monetary policy in the later period became more challenging due to repeated shocks for food and fuel prices. These shocks became more visible during the post-Pandemic phase and the Russia-Ukraine conflict, which pushed inflation away from the target range, a trend comparable to many other economies.
The RBI emphasized that India’s experience with inflation argeting is unique compared to other countries. This is because more than half of the consumer basket in India consists of food and energy items. Delivery shocks for these items created major challenges for stabilizing inflation, much greater than the efforts needed in other countries that have adopted inflation targeting.
This, according to the report, makes India’s experience important and full of lessons for other countries that have similar vulnerabilities. The report also noted that price stability in India was the result of effective coordination between the government and the central bank.
While the RBI focused on monetary tightening measures to prevent the second round effects of rising prices, the government carried out the interventions on the supply side to ensure a smoother availability of essential equality. According to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, according to the RBI, a crucial role in guaranteeing the success of flexible inflation that framework focuses.
The Central Bank noted that the credibility and flexibility have well served the country in the context of worldwide difficulties. It added that this framework can also be a useful template for other countries that are vulnerable to inflationary pressure from supply shocks.
In general, the RBI emphasized that the fit framework has not only provided stability in normal times, but also held the test during periods of extraordinary global challenges.
Published on August 22, 2025
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