India’s Inflation Target Extended (2026–2031)
- Context: The Union government asked the Reserve Bank of India (RBI) to target retail inflation at 4% with a margin of 2% on either side for another five years ending March 2031.
Continuation of Existing Policy
- This is the second extension of the same inflation target framework.
- Initially introduced in 2016, valid until 2021.
- Extended again in 2021, and now continued till 2031.
Policy Framework
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- Inflation targeting was formally adopted in 2016, giving the Reserve Bank of India the responsibility to control price rise.
- The framework operates through the Monetary Policy Committee (MPC), a six-member body.
Current Facts
- Consumer Protection Authority
The Central Consumer Protection Authority (CCPA), established under the Consumer Protection Act, 2019, undertakes the tasks of protecting consumer rights, regulating misleading advertisements, and ensuring product quality.
About Retail Inflation
- Retail inflation means the increase in prices of everyday goods and services that people purchase for personal consumption—basically, what consumers pay in markets and stores.
- It is tracked using the Consumer Price Index, which monitors the price movement of a fixed basket of commonly used items.
- Base year: In India, 2024 is currently used as the reference year for calculating CPI.
- The figures are published every month by the Ministry of Statistics and Programme Implementation.
- The Reserve Bank of India tries to keep retail inflation within 2% to 6%, maintaining a balance between price stability and economic growth.
Variable Rate Repo (VRR) Auction
- Context: The Reserve Bank of India infused ₹55,837 crore into the banking system through a 3-day Variable Rate Repo (VRR) auction to ease tightening liquidity conditions.
About Variable Rate Repo (VRR) Auction
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- VRR is a monetary policy mechanism used by the RBI to supply funds to banks when cash in the system is limited.
- Unlike the fixed-rate repo, the interest rate in a VRR is determined through competitive bidding among banks.
- The RBI announces the total funds available for lending (e.g., ₹1 lakh crore) and the duration of the repo (e.g., 3 days).
- Banks submit bids specifying the amount they want to borrow and the rate of interest they are willing to pay.
- Funds are allocated starting from the highest bid down to the cut-off rate, which is the lowest accepted rate.
- Banks pledge government securities as collateral, which they repurchase at the end of the repo period.
Aim of VRR
- Liquidity Management: Ensures banks have sufficient funds to meet day-to-day requirements.
- Stabilizing Interbank Rates: Prevents the Call Money Rate the rate at which banks lend to each other from rising sharply above the policy repo rate.
Current Facts- E-Jaagriti
- E-Jaagriti is an integrated, AI-based digital grievance redressal platform of the Department of Consumer Affairs.
- It is designed to integrate all consumer grievance redressal forums onto a single, seamless portal.
