Salary Growth vs Inflation: Are Nepalis Really Better Off?

Published on September 24, 2025

The relationship between salary growth and inflation is one of the most telling measures of whether workers are improving their standard of living. In Nepal, the Salary and Wage Rate Index shows that nominal incomes have risen in recent years but not always in step with inflation. For instance, salaries and wages grew just 2.76% in FY 2020/21, when inflation was 4.19%, meaning workers actually lost purchasing power. In FY 2021/22, wages jumped by 9.09%, but inflation also soared to 8.08%, leaving real income growth only marginal. Similarly, in FY 2022/23, wages rose by 8.71%while inflation was 7.44%—again, only a slim real gain.

The situation has become even more concerning in the last two years. In FY 2023/24, wages increased just 3.56%, barely keeping up with inflation at 3.57%. And in FY 2024/25, salary growth fell further to 2.63%, while inflation dropped to 2.20%. On paper, this means wages slightly outpaced inflation, but the real benefit to workers is negligible, particularly given rising non-food costs such as housing, utilities, education, and healthcare, which grew faster than the overall CPI.

This mismatch between salary growth and the cost of living suggests that most Nepalis are not significantly better offdespite stable inflation. While headline data shows some years of positive real wage growth, the gains are small, inconsistent, and easily offset by structural pressures such as high urban rents and imported goods dependency. For rural workers, the situation is even more difficult: with food inflation turning negative (-2.28% in mid-August 2082/83), farmers are facing lower incomes, even as urban households benefit from cheaper food prices.

The implication is that Nepali workers are effectively treading water. They are not experiencing significant improvements in purchasing power, and in many cases, real incomes remain stagnant. Without stronger productivity-driven growth, industrial expansion, and wage policies tied to cost-of-living changes, salaries will continue to lag behind household needs. This reinforces the reliance on remittances, as many families depend on foreign earnings rather than domestic wages to maintain living standards.

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.