The Central Government has decided to keep the retail inflation target unchanged at four percent for the next five years. This target will be applicable from 1 April 2026 to 31 March 2031. The Department of Economic Affairs of the Finance Ministry gave this information in the notification issued on March 25, 2026.
According to the notification, a target of 4 percent has been set for inflation, while its upper tolerable limit has been kept at 6 percent and lower limit has been kept at 2 percent. This decision has been taken in consultation with the Reserve Bank, under Section 45ZA of the Reserve Bank of India Act, 1934.
MPC’s decision will be affected
With this decision of the government, the existing mandate of the Reserve Bank of India (RBI) will also remain intact. The Monetary Policy Committee (MPC) will still set policy interest rates in line with this target, so that inflation can be kept within the prescribed range.
It is noteworthy that India formally adopted the inflation targeting framework in 2016. At the same time MPC was formed, which was entrusted with the responsibility of maintaining price stability. The initial period was till March 2021, after which the government has continued to pursue this target. This is the second time that the government has extended the four percent target without any changes.
current inflation situation
- CPI based inflation in February 2026: 3.21%
- Rural inflation: 3.37%
- Urban Inflation: 3.02%
- Food Inflation (CFPI): 3.47%
That means inflation is currently below the target (4%). During this period, prices of vegetables like tomato, peas and cauliflower declined by more than 10 percent, which reduced the pressure on food inflation.
In which states is inflation higher?
States with highest inflation in February 2026:
- Telangana
- Rajasthan
- Kerala
- Andhra Pradesh
- west bengal
How are data collected?
According to the government, inflation data is collected from 1407 urban markets and 1465 villages across the country. Data collection was successfully conducted from almost all the markets in February 2026, maintaining the reliability of the data.
Experts believe that maintaining the 4 percent target is a sign of policy continuity and economic stability. This provides clear direction to the market and investors, while also helping the RBI maintain a balance in the management of interest rates. Inflation data for March 2026 will be released on April 13, on which further monetary policy signals will depend.