The band is law, not decoration.
Since 2016 the Reserve Bank of India has had one job with a number attached: hold inflation at 4 per cent, inside a band from 2 to 6. What the band means, what happens when it breaks, and what it cannot do.
The charts on this page draw the consumer price index on its 2012 base, the series that ran to December 2025. From January 2026 the NSO publishes the index on a new base, 2024 = 100. The idea on this page works the same on either ruler; the latest figures are in the Consumer prices guide.
The word, defined
First principlesIn 2016, Parliament rewrote the Reserve Bank of India's job description. Price stability stopped being one goal among several and became the goal, with a number attached: keep consumer price inflation at 4 per cent, inside a band that runs from 2 to 6 per cent. A political promise was rewritten as arithmetic.
Notice what the band admits. Nobody can hold inflation at exactly 4 per cent in a country where nearly half the basket is food and the weather sets food prices. The band is an honest margin around an honest target: wide enough for the monsoon, narrow enough that missing it means something.
Ten years against the band
Headline y/y %, monthlyBelow is the decade the framework has governed: the inflation rate drawn against its own rules, with the tolerance band shaded and the 4 per cent target dashed. The four marked excursions are the whole history of the band being tested.
Mostly inside, four times out: the band doing its job
The shaded strip is the band; the dashed line is the target. The rate spends most of the decade inside the strip, which is the point of the framework: the band holds almost all of ordinary economic weather. The marked excursions are the exceptions. Twice food pushed the rate through the ceiling, once war and oil did, and once a year of falling food prices pulled it through the floor.
Of the 120 months on this chart, – closed above the ceiling and – below the floor. The peaks: – in January 2020, – in April 2022 and – in July 2023. The floor break came in October 2025, at –.
From January to September 2022 the rate never came back inside: quarterly averages of –, – and –, against a ceiling of 6 per cent. Three consecutive quarters outside the band triggered the clause, and in November 2022 the RBI wrote to the government explaining the miss.
The letter is the framework working exactly as written. Not a scandal: a mechanism.
A promise with a denominator
What the band can and cannot doAn inflation target does something subtler than restrain the central bank. It disciplines everyone else. Budgets, wage settlements and administered prices are all written in the knowledge that beyond 6 per cent, someone must explain themselves in writing. The band converts a vague promise, low inflation, into a test that either passes or fails each quarter.
What the target cannot do is set the price of onions. The RBI's tools move demand: credit, borrowing, spending. A food supply shock passes through the band on its own schedule, and the framework knows it, which is why the test is three consecutive quarters and not one bad month. The companion entry on the monsoon and food prices shows where those shocks come from.
How to misread this concept
- i.
“The band is a forecast.”
No. The band says nothing about where inflation will go; it says where inflation is allowed to be. A forecast can be wrong. The band is a rule, and a rule is either kept or breached.
- ii.
“Below the floor is always good news.”
It is cheap news with a catch. Inflation under 2 per cent is a breach of the mandate, not a bonus: sustained prints that low usually mean demand is weak, not merely that food is cheap. The floor exists because too little inflation is also a failure.
- iii.
“The RBI controls vegetable prices.”
It does not, and the framework knows it. Interest rates move demand, not the monsoon. The RBI can lean against a food spike spreading into wages and other prices; the spike itself belongs to the weather and the harvest.