CPI vs WPI: Which Reflects Nepal’s Inflation Better?

Published on September 24, 2025

Nepal tracks inflation through both the Consumer Price Index (CPI) and the Wholesale Price Index (WPI), but each provides a different lens. The CPI measures changes in the prices of goods and services consumed by households, while the WPI tracks prices at the wholesale or producer level. Recent data from FY 2082/83 shows CPI inflation cooling sharply to 1.68% in mid-August 2025, while WPI stood slightly higher at 2.37%. This divergence raises the question: which index better captures the real inflation experience in Nepal?

The CPI is often seen as the more relevant measure for the public because it directly reflects household expenses. It captures the day-to-day cost of living, including food, housing, education, health, and transport. For example, despite overall CPI easing, non-food inflation remains sticky at 3.95%, signaling rising costs in rent, healthcare, and utilities. On the other hand, food CPI has fallen to -2.28%, creating short-term consumer relief. These shifts immediately affect household purchasing power, making CPI the go-to measure for policymakers concerned with welfare and demand.

The WPI, however, acts as an early warning signal for future inflation. Since it reflects wholesale and producer-level prices, movements in WPI often precede changes in CPI. For instance, the drop in WPI from double-digit highs in FY 2021/22 (12.74%) to just 2.37% by mid-August 2082/83 has helped anchor consumer prices, leading to today’s low CPI. Still, very low WPI may also indicate weak demand and sluggish industrial activity, which could have broader implications for growth and employment.

In Nepal’s current context, CPI better reflects the lived reality of inflation, especially in terms of consumer welfare and household pressure. But WPI is indispensable for understanding cost structures in production and predicting future inflation trends. Policymakers and investors need both: CPI to track how inflation affects households, and WPI to anticipate potential inflationary pressures or risks of demand weakness in the economy.

Policy Lessons from India: Can Nepal Control Inflation More Effectively?

India has kept inflation relatively moderate through strong agricultural systems, buffer stocks, and inflation-targeting policies, while Nepal has historically struggled with food-driven volatility. Nepal’s CPI fell below India’s in 2025/26 for the first time in four years, but to sustain this trend, Nepal must strengthen supply chains, adopt buffer policies, and set clearer inflation targets.

Inflation Convergence in South Asia: What Nepal-India CPI Data Reveals

Nepal and India’s inflation rates, once far apart, have gradually converged—Nepal’s CPI dropping from 7.74% in 2022/23 to 1.68% in 2025/26, while India’s remained steadier around 2–5%. For the first time in four years, Nepal’s inflation fell below India’s, highlighting both shared regional cycles and unique domestic vulnerabilities.

Nepal vs India: Monthly CPI Comparison and Regional Economic Impact

Nepal’s inflation fell to 1.68% in August 2025/26, below India’s 2.07%, reversing a four-year trend. While both economies share similar seasonal inflation cycles, Nepal’s sharper food-driven spikes contrast with India’s steadier, monsoon-driven patterns. Regionally, this convergence impacts household costs, trade competitiveness, and economic stability.

Inflation Gap Narrows: Nepal’s Deviation with India Falls to -0.39% in 2025/26

In August 2025/26, Nepal’s CPI stood at 1.68%, lower than India’s 2.07%, with the inflation deviation dropping to -0.39% for the first time in four years. While Nepal gained from falling food prices, India’s inflation stayed higher due to agricultural pressures, though both countries continue to face rising service costs.

Cross-Border Inflation Trends: How Nepal and India’s Prices Move Together and Apart

Nepal and India’s inflation trends usually move in sync, reflecting shared regional and global factors. But in August 2025/26, Nepal’s inflation (1.68%) fell below India’s (2.07%) for the first time in four years, thanks to easing food prices in Nepal, while India faced higher agricultural pressures.

Nepal vs India Inflation 2025/26: Why Nepal’s CPI Fell Below India’s for the First Time

In August 2025/26, Nepal’s inflation dropped to 1.68%, falling below India’s 2.07% for the first time in four years. While food price declines drove Nepal’s slowdown, India’s inflation held slightly higher due to agricultural pressures. However, Nepal’s service costs remain a long-term challenge, even as headline CPI looks favorable.