Inflation hits 12-yr low of 3.2pc in Jan

- Post Report, Kathmandu
All major food items, from cereal grains, pulses and legumes to vegetables, meat, fish, ghee, cooking oil and fruits became cheaper by 1.2 percent to 13.9 percent

Feb 18, 2017-Inflation has dropped to its lowest rate in 12 years of 3.2 percent as a fall in prices of food and beverages brought down the cost of living.

Prices of food and beverages fell 0.7 percent on average in January. All major food items, from cereal grains, pulses and legumes to vegetables, meat, fish, ghee, cooking oil and fruits became cheaper by 1.2 percent to 13.9 percent. 

The drop has been due mainly to the base effect, improved supply situation and deceleration in Indian inflation, says the latest macroeconomic report of Nepal Rastra Bank (NRB), the central bank.  

A drop in prices of food and beverages, which account for 43.9 percent of the consumer basket, led consumer prices to rise at the slowest pace since December 2004, when inflation stood at 3.1 percent. 

Earlier, NRB said that the deceleration in inflation in recent months, however, should not be taken as a fall in overall consumer demand, which could pose a threat to Nepal’s aim of achieving economic growth of 6.5 percent in this fiscal year.

According to the central bank, inflation is moderating because of a correction in prices, which had risen at a rapid pace last year because of a supply disruption triggered by the Indian trade embargo.

Disruption in trade between Nepal and India hits domestic prices because the country relies on the southern neighbour for more than 60 percent of its imports. This means that a fall in prices in India may not necessarily transfer to Nepal if there are problems in movement of goods.

Lately, inflation has been moderating in India because of Prime Minister Narendra Modi’s shock currency replacement programme, which has hit consumer spending. Because of this, Indian inflation cooled down to 3.2 percent in January.

With the moderation in prices in India, prices of ghee and cooking oil fell by a whopping 13.9 percent in Nepal in January, while prices of pulses and legumes dropped by 6.6 percent. Even prices of cereal grains, which account for 11.33 percent of the consumer basket, fell by 1.2 percent in January, shows the NRB report.

However, the price of sugar and sugar products has gone up by 15 percent because of a slump in the production of sugar in Nepal and India, which has led to shortages.

Also, prices of clothes and footwear jumped 10.1 percent in January, while house rents and utility bills went up by 7.5 percent. However, transportation fares dropped by 3.3 percent and communications costs fell by 1 percent.

“The only threat to inflation [in Nepal] is from the global rise in oil prices,” says the NRB report.


Price Rise

Overall    3.2%

Food    (0.7%)

Non-food and services    6.2%

Kathmandu Valley    1.9%

Tarai    2.8%

Hill    5.7%

Mountain    4.2%

Source: Nepal Rastra Bank

Published: 18-02-2017 09:18

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