India’s government is considering recommending a looser inflation target for the central bank, allowing it to focus more on economic growth despite price pressures, according to people familiar with the matter.
A consumer-price inflation band tracked by the Reserve Bank of India may be relaxed further from the current 2%-6% range, said the people, who asked not to be identified citing rules. The government still needs to hold consultations with the central bank before finalizing a new framework sometime next year.
The current mandate, set in 2016, requires the RBI to keep headline inflation at the 4% midpoint of its target range. The band — a broad range of 400 basis points within which the central bank has sanction to operate — is the widest in Asia, and only matched by Turkey and surpassed by Argentina.
The Finance ministry is of the view that the RBI can’t be saddled with a rigid inflation targeting framework, especially in situations when growth needs to be pushed, the people said.
A spokesperson for the Finance Ministry declined to comment, while the RBI didn’t immediately respond to an email seeking comment.