Chapter IIIF — Monetary Policy

Section 45ZA: Inflation target

Reviewed by CA Nikhil Gupta · Last reviewed 18 September 2026

Section 45ZA requires the Central Government, in consultation with RBI, to determine the inflation target in terms of the Consumer Price Index once every five years and notify it in the Official Gazette.

Operative provisionOfficial sources mappedProvision-specific decode

Finin2min - Section 45ZA in 2 minutes

Legal effectSection 45ZA requires the Central Government, in consultation with RBI, to determine the inflation target in terms of the Consumer Price Index once every five years and notify it in the Official Gazette.

Operative ruleFor the period 1 April 2026 to 31 March 2031, S.O. 1580(E) fixes the CPI inflation target at 4%, with the upper tolerance level at 6% and lower tolerance level at 2%.

Connected lawThe target notification is legally distinct from an MPC policy-rate decision; the Government/RBI consultation sets the target while the MPC sets the policy rate needed to achieve it.

File evidenceFor policy analysis, retain the operative Gazette notification, target period, measure (CPI Combined), target and tolerance band.

Statutory structure and clause / subsection decode

This map separates the operative limbs of this provision so thresholds, powers, conditions and exceptions are not collapsed into a single summary.

45ZA(1)

Central Government, in consultation with RBI, determines the inflation target in terms of CPI once every five years.

Publication

The target is notified in the Official Gazette.

2026-31 period

S.O. 1580(E), 25 March 2026: 4% CPI inflation target, upper tolerance 6%, lower tolerance 2%, for 1 April 2026 to 31 March 2031.

Boundary

Failure mechanics are in Section 45ZN and the separate failure-factor notification; the target notification alone does not define every failure consequence.

Worked practical example

Facts. A monthly CPI print of 6.2% is above the upper tolerance level, but whether the statutory 'failure' mechanism is triggered must be assessed separately under Section 45ZN's consecutive-quarter test.

Compliance points and common mistakes

Do not decide the issue from the heading alone. Map the facts to the operative words of Section 45ZA and to each relevant subsection, clause, proviso or explanation shown above.
Keep the statutory question separate from the operational overlay. The target notification is legally distinct from an MPC policy-rate decision; the Government/RBI consultation sets the target while the MPC sets the policy rate needed to achieve it.
Do not convert an exception, exemption or discretionary RBI/Government power into an automatic entitlement. Record the authority, conditions and effective date.
Where the provision is historical, omitted or repealed, state that status prominently and do not present it as a current compliance obligation.

Connected provisions and instruments

Inflation Target Notification, 2026–2031S.O. 1580(E), 25 March 2026: 4% CPI target with 6% upper and 2% lower tolerance for 1 April 2026–31 March 2031.

Questions and answers

What is the purpose of Section 45ZA?

Inflation target: Section 45ZA requires the Central Government, in consultation with RBI, to determine the inflation target in terms of the Consumer Price Index once every five years and notify it in the Official Gazette.

Which statutory limb should be checked first?

45ZA(1) - Central Government, in consultation with RBI, determines the inflation target in terms of CPI once every five years.

What is the next legal boundary?

Publication - The target is notified in the Official Gazette.

What record should support the conclusion?

Section 45ZA file evidence: For policy analysis, retain the operative Gazette notification, target period, measure (CPI Combined), target and tolerance band.

Primary sources

Source control for Section 45ZA: use the official consolidated RBI Act for the statutory text and footnotes, then separately reconcile any post-Finance Act 2022 amendment, commencement notification or RBI instrument relevant to the event date.