Average Inflation Contained, But Year-End Price Pressures Mount

Despite Nepal Rastra Bank (NRB) successfully keeping the annual average inflation well within its target for the fiscal year 2082/83, consumers faced mounting price pressures as the year drew to a close. According to central bank data, the annual average consumer price inflation was restricted to just 3.08 percent, significantly below the 5 percent ceiling. However, monthly trends reveal a volatile trajectory: inflation peaked at a staggering 8.47 percent in Jestha before settling at 5.14 percent in Asar. In stark contrast, the inflation rate in Asar of the previous fiscal year stood at a mere 2.20 percent.

The latter half of the fiscal year witnessed a noticeable surge in the costs of both food and non-food items. While the annual average inflation for the food and beverage group was recorded at 1.04 percent, its point-to-point inflation in Asar jumped to 5.25 percent. Consumers felt the pinch particularly in everyday essentials, with the prices of ghee and oil surging by 10.05 percent and fruits by 7.09 percent. Similarly, the non-food and services sector—driven by rising costs in education, transportation, and clothing—registered an average annual inflation of 4.21 percent, with the Asar rate climbing to 5.08 percent.

Geographically, the inflationary heat was felt most intensely across the southern plains. In Asar, the Terai region recorded an inflation rate of 5.63 percent, while Madhesh Province topped the provincial charts at 5.94 percent. Furthermore, wholesale inflation sharply escalated to 6.67 percent in Asar. This spike at the wholesale level signals a looming risk that these elevated costs could soon pass through to the retail market, further squeezing household budgets in the coming months.

Although the annual average wage and salary index grew by 5.79 percent over the fiscal year, the sharp, concentrated price hikes in essential goods and services likely eroded the real purchasing power of the general public. Meanwhile, Nepal's inflation remained comparatively higher than that of its southern neighbor; in July, India's retail inflation stood at 4.45 percent, placing Nepal's inflation 0.69 percentage points higher during the same period.