Wage and Salary Index Growth: Are Nepali Workers Falling Behind?

Published on September 24, 2025

The Salary and Wage Rate Index in Nepal offers critical insights into how workers’ earnings are evolving relative to inflation and overall economic growth. Over the past five years, the index has shown significant fluctuations. In FY 2020/21, growth was just 2.76%, reflecting the lingering slowdown from the pandemic. It jumped sharply to 9.09% in FY 2021/22 and 8.71% in FY 2022/23, driven by post-COVID labor market adjustments, increased demand in certain sectors, and rising inflationary pressures. However, this momentum has not been sustained: wage growth slowed to 3.56% in FY 2023/24 and further to just 2.63% in FY 2024/25, signaling stagnation in workers’ income growth.

When these wage trends are compared with inflation, the picture becomes more concerning. During periods of high inflation—such as FY 2021/22 (8.08%) and FY 2022/23 (7.44%)—wage growth barely kept pace, meaning workers’ real incomes did not increase significantly. In contrast, as inflation cooled to 2.20% in FY 2024/25, wage growth also weakened to 2.63%, suggesting that employees are not fully benefiting from price stability. Essentially, while households faced higher living costs during inflationary peaks, they are now seeing limited income growth even as prices stabilize.

This mismatch raises the question: are Nepali workers falling behind? The answer leans toward yes. Although nominal wages have increased in recent years, they have not consistently outpaced inflation, which means real purchasing power remains stagnant. The slowdown in wage index growth also points to structural weaknesses in the labor market—such as underemployment, dominance of low-productivity jobs, and limited industrial expansion—that prevent meaningful income gains for workers.

The implications are wide-ranging. Stagnant real wages constrain domestic demand, limit household savings, and reinforce dependence on remittances. For Nepal to ensure that workers are not left behind, policies must focus on creating higher-productivity jobs, strengthening labor rights, and linking wage growth more closely to economic performance and productivity gains. Without such reforms, wage stagnation risks widening inequality and undermining the benefits of macroeconomic stability.

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.