December 23: The gap in consumer prices (inflation) between Nepal and India is increasing noticeably. Inflation is decreasing in India compared to that of Nepal but the gap is increasing due to the inabilityof Nepal to control inflation.
According to Nepal Rastra Bank, by mid-August of the current financial year, the consumer price inflation in Nepal was only 1.26 percentage points higher than in India. However, by mid-November, Nepal's inflation was 2.2 percentage points higher than that of India.
By mid-August, the inflation in Nepal was 8.26 percent while it was only 7 percent in India. By mid-November, Nepal's inflation fell to 8.08 percent, while that of India dropped to 5.88 percent.
Nar Bahadur Thapa, former executive director of NRB said, “Since the Indian government's public distribution system is very much organized, it has controlled the price hike to a large extent. If the inflation in India was not brought under control, inflation in Nepal would have reached double digits.”
Since the consumer price inflation is based on the price of agricultural produce and consumer goods, the price hike in Nepal depends on imports. Economist Haribol Kafle said that since most of the consumer goods are imported in Nepal, the inflation in Nepal is affected by inflation in neighbouring India. Kafle claimed that the production and distribution system of consumer goods in India is well organized and the price hike is low due to the practice of subsidizing low-income consumers.
In Nepal, the consumer price inflation remained at 8.08 percent in mid-November 2022 compared to 6.04 percent a year ago. Food and beverage inflation stood at 7.38 percent whereas non-food and service inflation rose to 8.63 percent in the review month. Meanwhile, the wholesale price inflation increased 10.02 percent in the review month compared to 6.68 percent a year ago.
Looking at additional data from NRB, imports decreased 18.1 percent, exports decreased 33.3 percent and trade deficit decreased 15.9 percent. Similarly, remittances increased 20.4 percent while the Balance of Payments remained at a surplus of Rs 20.03 billion.
