Inflation rises at slowest pace in almost 10 years

- Post Report, Kathmandu

Dec 17, 2016-Average prices of goods and services rose at the slowest pace in almost a decade in November, as food inflation eased and transportation and communication costs fell.

Consumer prices went up by 4.8 percent in November, according to the latest macroeconomic report of Nepal Rastra Bank. 

The last time prices had cooled to this level was in June 2007 when inflation stood at 4.5 percent. Since then, inflation has hit a peak of 14.5 percent in November 2008. 

Consumer prices also soared by 12.1 percent in January 2016 after India imposed a trade blockade, disrupting supplies of almost everything from petroleum products and raw materials to daily essentials. Inflation has, however, been easing since the blockade was lifted in February.

“The pressure on overall consumer price inflation has eased on account of moderation in both food and non-food inflation,” the central bank’s report said.

Inflationary pressure has cooled following a fall in consumer prices in India. Inflation in India stood at a two-year low of 3.6 percent in November. In a net-importing country like Nepal, which relies on India for over 60 percent of its imports, a fluctuation in consumer prices in the southern neighbour directly affects prices here.

India’s retail inflation moderated after Prime Minister Narendra Modi’s shock currency replacement programme dented consumer spending, Reuters said. 

The decision taken by the Indian government on November 8 to pull IRs500 and IRs1,000 notes out of circulation has significantly reduced consumer demand, as people either don’t have much cash to make purchases or are holding back on spending.

As a result, food inflation stood at 2.11 percent in India in November, lower than October’s 3.32 percent, Reuters said.

With the moderation in food prices in India, food inflation also eased to 2.6 percent in Nepal. Food, including beverage, accounts for 43.9 percent of the consumer basket in Nepal. 

Food prices cooled down as average prices of ghee and cooking oil slumped by 19.8 percent while prices of pulses and legumes dropped by 2.3 percent. Even prices of cereal grains, which account for 11.33 percent of the consumer basket, increased marginally by 1.5 percent, shows the NRB report. 

Yet prices of sugar and sugar products swelled 13.2 percent in November on the back of a drop in domestic sugar production last year.

Most non-food items also witnessed a sharper hike in prices. Education costs, for instance, jumped 10 percent, while prices of clothes and footwear rose 9.2 percent. However, transportation costs dropped 6.4 percent and communication costs fell 0.6 percent, shows the NRB report.

 

Inflation

Overall    4.8pc

Food      2.6pc

Non-food and services      6.5pc

Kathmandu Valley      3pc

Tarai      5.1pc

Hill      6.2pc

Mountain     4pc

Published: 17-12-2016 09:23

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