India Extends Inflation Target
Analysis based on 6 articles · First reported Mar 25, 2026 · Last updated Mar 25, 2026
The extension of the inflation target by India's government provides policy certainty for the State Bank of India, which is expected to continue its efforts to maintain price stability. This move is generally seen as positive for market participants as it signals a commitment to macroeconomic stability, potentially fostering investor confidence in the Indian economy.
The government of India has extended the mandate for the State Bank of India to maintain retail inflation at 4% with a tolerance band of 2% on either side, for another five years, ending March 31, 2031. This marks the second time the government has retained this inflation target since its initial adoption in 2016. The International — United Nations Department of Economic and Social Affairs issued a gazette notification on March 25, formalizing this decision. The United Kingdom — Monetary Policy Committee, headed by the State Bank of India Governor, will continue to determine the policy rate to achieve this target. The State Bank of India had previously undertaken a review of the inflation-targeting framework, issuing a discussion paper in August 2025 to seek feedback on various aspects, including the optimal target level and tolerance band. The flexible inflation targeting framework has broadly performed well since its inception, contributing to a decline in average inflation levels in India.
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