The Reserve Bank of India (RBI) in a report on currency and finance for the year 2020-21 said "the current numerical framework for defining price stability, i.e., an inflation target of 4 percent with a +/-2 percent tolerance band, is appropriate for the next five years."
the repetitive incidence of supply shocks, still elevated inflation expectations and projection errors necessitate persevering with the current numerical framework for the target and tolerance band for inflation for the next five years," the RBI said in its report on currency and finance, which reviewed the monetary policy framework.
Governor Shaktikanta Das also has thrown his weight behind the existing numerical targets, saying earlier this week the current framework has ensured the Indian economy has achieved a lot and the gains of this achievement need to be "preserved, consolidated, and nurtured". The report said that given that there was no numerical growth target, it was not possible to objectively assess whether the primacy assigned to price stability had contributed to the growth slowdown.
In fact, the report argued that evidence suggested tolerance of 6%-plus inflation "can be harmful to growth". With regard to the lower tolerance limit, the report said it should not be lower than 2%. While the RBI report favored an unchanged inflation targeting framework, it did propose a new definition of 'failure' of the Monetary Policy Committee.
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