The government on Wednesday asked the Reserve Bank of India to maintain the retail inflation target for next five financial years at 4%, with a margin of 2% on either side.

"The inflation target for the period April 1, 2021 to March 31, 2026 under the Reserve Bank of India Act 1934 has been kept at the same level as was for previous 5 years," Economic Affairs Secretary Tarun Bajaj said.

Commenting on the government's decision, ICRA principal economist Aditi Nayar said the continuation of the MPC's inflation targeting band at 2-6 per cent is welcome, as an upward revision could have contributed to an unanchoring of inflation expectations.

On inclusion of government bonds in global indices, Bajaj said, efforts are on and something on that front should happen next financial year. The move would attract higher foreign flows as many overseas funds are mandated to track global indices. It will also help bring in large passive investments from overseas, as a result of which more domestic capital would be available for industry as crowding out would be reduced.

Dismissing fears on impact of large borrowing on private investment, Bajaj said there is ample liquidity in the market. The cost of borrowing for the government as a result has declined this year, he added. The government has other alternatives, including the National Social Security Fund.