Govt Retains 4% Inflation Target for 2026-31; Upper Tolerance Stays at 6%

The Central Government has maintained the retail inflation target at four per cent for the five-year period starting April 1, 2026, and ending March 31, 2031. According to a notification issued by the Ministry of Finance, the upper tolerance level remains at six per cent while the lower limit is set at two per cent.

The Department of Economic Affairs, under the Ministry of Finance, issued the official notification on March 25, 2026. The order states that "in exercise of the powers conferred by section 45ZA of the Reserve Bank of India Act, 1934 (2 of 1934), the Central Government, in consultation with the Bank, hereby notifies the inflation target" for the specified period. 

The document clarifies the parameters as "Inflation Target: Four per cent. Upper tolerance level: Six per cent. Lower tolerance level: Two per cent." 

This decision ensures the mandate for the Reserve Bank of India remains unchanged as the country enters the new fiscal cycle.

The latest extension mirrors the policy architecture India adopted in 2016 when it transitioned to a formal inflation-targeting framework. This system placed the responsibility of price stability on the Monetary Policy Committee (MPC), a six-member body headed by the RBI Governor that calibrates interest rates to keep retail inflation anchored.

The MPC first took up this mandate during its inaugural meeting in October 2016, with an initial term that ran through March 31, 2021. Since that period concluded, the Centre has consistently opted to stick with the original 4 per cent goal. This latest notification marks the second consecutive instance where the government has formally chosen to keep the existing inflation targets unchanged.

The notification comes at a time when retail inflation, measured by the Consumer Price Index (CPI), showed a reading of 3.21 per cent for February 2026. 

Earlier in March, the Ministry of Statistics and Programme Implementation noted that corresponding inflation rates for rural and urban areas were 3.37 per cent and 3.02 per cent, respectively.

Overall, the headline inflation was an increase of 47 basis points on a year-on-year basis in February 2026.

On a month-on-month, there had been a decrease of more than 10 per cent observed in the index of Tomato, Peas and Cauliflower in February, 2026 with respect to January, 2026.

Inflation rate based on All India Consumer Food Price Index (CFPI) for the month of February, 2026 over February, 2025 was 3.47 per cent (Provisional). Corresponding inflation rates for rural and urban were 3.46 per cent and 3.48 per cent, respectively.

Top five States (having more than 50 lakhs population as per Census 2011) with highest inflation in February, 2026 were Telangana, Rajasthan, Kerala, Andhra Pradesh, and West Bengal, data showed.

Real time price data is collected from selected 1407 urban Markets (including online markets) and 1465 villages covering all States/UTs through personal visits by field staff of Field Operations Division of NSO, MoSPI on a weekly roster. During the month of February, 2026, prices were collected from 100% rural and urban markets while the market-wise prices reported therein were 99.89% for rural markets and 99.78% for urban markets.

CPI for March 2026 will be released on April 13, 2026 (Monday) or the next working day in case of 13th being a holiday. 

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