---
title: "Flexible Inflation Targeting Framework Explained"
description: "The Flexible Inflation Targeting Framework helps the RBI maintain a 4% CPI target with a ±2% band, balancing inflation control and economic growth."
url: "https://modeldiplomat.com/learn/glossary/inflation-targeting-framework"
---

[New](https://modeldiplomat.com/)

#

Model Diplomat Research Team · Last reviewed June 22, 2026

TL;DR

- A flexible inflation targeting framework is a monetary policy regime under which a central bank pursues a numeric inflation target while also weighing growth and output objectives.
- What is India's inflation target and who sets it?
- What happens if the RBI fails to meet the inflation target?
- How does flexible inflation targeting differ from strict inflation targeting?
- Who sits on the Monetary Policy Committee?

[Civil Service & Diplomatic Exams](https://modeldiplomat.com/learn/civil-services/glossary)Updated June 22, 2026

Go beyond the definition

## Research Flexible Inflation Targeting Framework like a delegate

Model Diplomat's AI drafts position papers, speeches, and country research with real sources — built for MUN and politics students.

## Timeline

1. 5 August 2016

   The corresponding notification of set the target at 4 per cent Consumer Price Index (CPI-Combined) inflation, with a tolerance band of ±2 per cent, that is…

2. 20 February 2015

   The reform implemented the recommendations of the Urjit Patel Committee report of January 2014 and was formalised through the Monetary Policy Framework Agree…

3. 3 November 2022

   The RBI invoked the breach provision for the first time after CPI inflation remained above 6 per cent through the first three quarters of 2022, driven by the…

4. 31 March 2026

   The current five-year target cycle, notified in 2021, retains the 4 per cent central point and ±2 per cent band through .

## Positions at a glance

### Supporters

A flexible inflation targeting framework is the statutory architecture under which a central bank commits to achieving a numerically specified inflation rate over the medium term while retaining discretion to support output and employment when shocks demand it. In India the framework rests on the Reserve Bank of India Act, 1934, as amended by the Finance Act, 2016, which inserted Section 45ZA empowering the Central Government, in consultation with the RBI, to fix the inflation target once every five years. The corresponding notification of 5 August 2016 set the target at 4 per cent Consumer Price Index (CPI-Combined) inflation, with a tolerance band of ±2 per cent, that is an upper limit of 6 per cent and a lower limit of 2 per cent. The reform implemented the recommendations of the Urjit Patel Committee report of January 2014 and was formalised through the Monetary Policy Framework Agreement signed between the Government and the RBI on 20 February 2015, replacing the earlier multiple-indicator approach in which the central bank tracked money supply, credit, output and the exchange rate without a single nominal anchor.

### Opponents

For the working practitioner — the UPSC aspirant addressing GS Paper III, the desk economist, or the policy analyst — the framework is the organising principle of contemporary Indian monetary governance and a frequent examination and briefing topic. Mastery requires command of the precise statutory citations (Sections 45ZA to 45ZN), the numeric target and band, the MPC's composition and voting rules, the fourteen-day minutes requirement, and the three-consecutive-quarter breach trigger. Understanding how flexibility is operationalised — through the medium-term horizon and the discretion to accommodate supply shocks — distinguishes a superficial recall of "4 per cent ±2" from a genuine grasp of how the regime balances credibility against the realities of a developing economy.

## Research it like a delegate

Research on modeldiplomat.com

## Ask a follow-up about Flexible Inflation Targeting Framework

Open a cited briefing in Model Diplomat search — timelines, positions, and sources you can use in committee or exam answers.

[Start research on Flexible Inflation Targeting Framework](https://modeldiplomat.com/search?q=Explain%20Flexible%20Inflation%20Targeting%20Framework%20%E2%80%94%20key%20dates%2C%20actors%2C%20positions%2C%20and%20sources)

Example

In November 2022, the Reserve Bank of India's Monetary Policy Committee, chaired by Governor Shaktikanta Das, held a special meeting to prepare its first-ever report to the Central Government after CPI inflation breached the 6 per cent upper tolerance for three consecutive quarters.

Keep learning

## Go deeper than the definition

[Explore all Civil Service & Diplomatic Exams lessons](https://modeldiplomat.com/learn/civil-services)[Test yourself with a quiz](https://modeldiplomat.com/learn/glossary/quiz/civil-services)

## Take Flexible Inflation Targeting Framework beyond the glossary

Ask the AI research engine built for diplomacy — get briefings, position papers, and speeches with sources you can cite in committee.