Inflation Targeting — Policy Reforms

Entry	Year	Description	Impact
Finance Act, 2016 (amending the RBI Act, 1934)	2016	This landmark amendment provided the statutory basis for the flexible inflation targeting framework in India. It legally mandated the Central Government, in consultation with the RBI, to set an inflation target and established the Monetary Policy Committee (MPC) as the authority to determine the policy rate to achieve this target. It also laid down the accountability framework for the RBI if the target is missed.	Transformed India's monetary policy from a discretionary, multiple-indicator approach to a rules-based, transparent, and accountable inflation targeting regime. Institutionalized the MPC, enhancing credibility and reducing individual discretion in rate-setting decisions. Elevated price stability as the primary objective of monetary policy.