How much percentage of 5- year Consumer Price Inflation (CPI) target has been set by Union Government under monetary policy framework?
The Union Government has set a Consumer Price Inflation (CPI) target of 4 % (plus or minus 2 %) for the period from August 2016 to March 31, 2021 under monetary policy framework. As per section 45ZA of the RBI Act 1934, the Union Government has set the inflation target in consultation with the Reserve Bank of India (RBI) Governor Dr. Raghuram Rajan. For this, Union Government will soon set-up Monetary Policy Committee (MPC) to adhere to the target till March 31, 2021. The key advantage of a target is that it allows the MPC to recognise the short run trade-offs between inflation and growth but enables it to pursue the inflation target in the long run over the course of a business cycle.