New Delhi, Oct. 27 -- In 2016, the Reserve Bank of India (RBI) Act was amended to give flexible inflation targeting (FIT) statutory status. India's target was fixed at 4%, with a tolerance band of plus or minus 2%. As the second five-year term of this framework comes up for review in March 2026, it is time to ask whether FIT has served India well and what may need to be refined.

Macroeconomic outcomes: Average inflation during 2010-2015-before FIT-was 8.7%. Since 2016, it has fallen sharply to 4.8%, the steepest fall among Asian peers that adopted FIT. Non-FIT economies show a patchy record on price stability-China, Hong Kong and Bangladesh managed modest declines, but Malaysia saw prices rise.

India has also reduced inflation uncertain...