Food vs Non-Food Price Trends: The Changing Face of Inflation

Published on September 24, 2025

Nepal’s inflation story in recent years has shifted from being primarily food-driven to being increasingly shaped by non-food price pressures. The data from mid-August 2082/83 (2025/26) shows a stark divergence: food CPI fell by -2.28%, while non-food CPI rose by 3.95%. This split indicates a new phase in Nepal’s inflation pattern, where consumers enjoy relief at the grocery basket but continue to face rising costs in other essential categories.

The decline in food prices is linked to strong harvests, increased imports supported by record foreign exchange reserves, and lower global commodity prices. Food inflation had already turned negative in FY 2024/25 (-1.19%) and has deepened further this fiscal year. For urban households, this has provided welcome relief, while for rural farmers, it has translated into reduced incomes and lower profitability, worsening rural-urban income inequality.

On the other hand, non-food inflation has proven more persistent. Items such as housing, utilities, education, healthcare, and transport have continued to climb steadily. Even as overall CPI inflation dropped to just 1.68% by mid-August 2082/83, non-food inflation remained sticky, highlighting structural cost pressures. Urban families, in particular, are feeling this burden, as a large share of their spending is directed toward rent, school fees, medical costs, and energy.

This divergence between food and non-food inflation underscores the changing face of Nepal’s inflation challenge. In the past, inflation spikes were often driven by food shortages and agricultural volatility. Today, the bigger risk lies in non-food sectors, where price pressures are less seasonal and more structural. For policymakers, the task is twofold: ensuring farmers do not suffer from prolonged food deflation while also addressing rising urban living costs that erode household purchasing power.

If left unchecked, this imbalance could slow domestic demand. Cheaper food supports consumption in the short run, but persistently high non-food inflation limits disposable income and savings. To manage this transition, Nepal must invest in agricultural value chains to stabilize farm incomes and pursue reforms in housing, energy, and public services to contain non-food inflation.

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.