Government fixes an inflation target of 4 percent for five years
EW DELHI: The government has set an inflation target of four per cent for the next five years.Monetary Policy Committee, to be set-up soon, will have to adhere to the target till March 31, 2021. A notification, placed in Parliament by Minister of State for Finance Arjun Meghwal has put to rest the speculation over the inflation target.
The government and RBI had last year reached an agreement on a monetary policy framework that had set the inflation target at four per cent, plus or minus two per cent. However, there was no legal backing to it.The government in June notified rules for setting up the Monetary Policy Committee giving affect to amendments in the RBI Act.
The inflation target was not notified that time fuelling speculation that the government might change it.Once the Committee is set-up, it will set policy interest rate with the objective of keeping inflation in this range.
