Fiscal dominance Finally, one reason the RBI was historically reluctant to lock itself into an inflation-focused framework is because it feared government over-spending would make its task impossible. The possibility of fiscal dominance, however, only means that given the inflation objective set by the government, both the government and the RBI have a role to play.
If the government overspends, the central bank has to compensate with tighter policy to achieve the inflation objective. So long as this is commonly understood, an inflation-focused framework means better coordination between the government and the central bank as they go towards the common goal of macro stability.