The Union government did well to retain the inflation target under the flexible inflation targeting framework. Consequently, the Reserve Bank of India (RBI) will have to maintain the inflation rate based on the consumer price index at 4 per cent with a tolerance band of 2 percentage points on either side till 2025-26.
Several commentators had suggested increasing the upper tolerance limit to give the central bank more flexibility in dealing with economic shocks, such as the one associated with the pandemic. Although such a move would have given the monetary policy committee (MPC) more ...
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