RBI Inflation Targeting Helped Anchor Growth At 6.1%, Says Governor Malhotra

India’s economic growth over the past decade has been supported by price stability maintained by the Reserve Bank of India, Governor Sanjay Malhotra said on April 18, highlighting the role of monetary policy in sustaining expansion.

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Speaking at Princeton University, Malhotra said India recorded an average annual growth rate of 6.1% over the last decade, compared with 3.2% for the global economy. Among major peers, China grew at 5.6% while Indonesia recorded 4.2% growth during the same period.

Inflation Targeting Framework Lowers Price Pressures

The RBI governor said the adoption of the Flexible Inflation Targeting (FIT) framework in 2016 played a key role in moderating inflation. Average inflation declined to 4.7% during September 2016 and December 2025, compared with 7.4% between April 2012 and August 2016, according to RBI data cited in the speech.

Under the current framework, the inflation target is set at 4%, with a tolerance band of ±2%. Malhotra said this range allows policymakers to manage supply-side shocks, particularly in food and fuel, which carry significant weight in the consumer price index.

Policy Approach Amid Global Uncertainty

Addressing global developments, Malhotra referred to supply-side disruptions linked to geopolitical tensions in West Asia. He said the central bank’s approach has been to assess whether such shocks translate into broader inflationary pressures.

“The approach has been to remain data-dependent and reassess risks continuously,” he said, adding that the RBI is currently in a “wait-and-watch mode” as inflation and growth dynamics evolve.

Fiscal Measures Complement Monetary Policy

Malhotra further highlighted the fact that some initiatives from the government side have facilitated inflation management through monetary policy. He cited that initiatives from the RBI, like building robust agriculture structures, upgrading storage facilities, and streamlining the supply chain for essential goods and energy sources, have assisted in stabilizing prices.

He stated that policy coordination has enabled stability within the macroeconomic environment, thereby facilitating positive outcomes for various growth drivers such as consumption, investment, and service activities.

These statements clearly show that FIT-based inflation management and coordinated fiscal policies have formed an important element of economic policy in India over the last ten years.