Inflation Target: India's Monetary Policy Framework

The Reserve Bank of India (RBI) operates under a flexible inflation targeting framework, mandated by the Government of India.

The Monetary Policy Committee (MPC) is responsible for setting the policy repo rate to manage inflation. The current inflation target, as set by the Government and accepted by the RBI, remains crucial for macroeconomic stability.

Inflation Target Details

The Government of India has set the inflation target for the period up to April 2026 as follows:

• Target Rate: 4%
• Tolerance Band: Plus or minus (±) 2%

This means the MPC aims to keep inflation within the range of 2% to 6% (4% ± 2%).

Correct Answer Analysis

Based on the established monetary policy framework:

• Option 1 correctly states the inflation target as 4% with a tolerance of ±2%.
• Other options present different target rates or tolerance levels not currently mandated.

Therefore, the inflation target set by the Government of India under the Monetary Policy Committee framework until April 2026 is 4% with a tolerance of ±2%.