Inflation moderates to 2.9 percent

  • buying power
- Post Report, Kathmandu

Apr 10, 2017-

Consumer prices rose at the slowest pace in over 12 years in March driven by a bumper harvest that cooled down food prices and correction that took place since the Indian blockade was lifted.

Inflation moderated to 2.9 percent in March, the lowest since November 2004 when consumer prices had gone up by 2.7 percent, shows the latest Macroeconomic Report of the Nepal Rastra Bank.

“The year-on-year inflation has been decelerating in recent months due mainly to previous year’s base price effect and improved supply situation,” says the report. 

Nepal was reeling under the effect of the Indian trade blockade in March last year. The embargo, which continued from September 2015 to February 2016, choked supply of everything from daily essentials, petroleum products and raw materials, paving the way for unscrupulous traders to jack up prices sharply.

As a result, prices of goods and services had gone up by an average of 12.1 percent in January 2016. 

“Lately, inflationary pressure has continued to ease and is expected to remain subdued,” says the report.

It is also said consumer prices in Nepal will rise at a slower pace than in India in the coming months, because prices, which had gone up considerably during the blockade, have started moderating. 

A sneak peek of this trend was seen in February when inflation in Nepal stood at 3.3 percent, as against 3.7 percent in India. The Indian government is expected to announce inflation data for March on Wednesday.

Considering the developments so far, inflation is likely to undershoot the annual target of 7.5 percent in 2016-17, says the NRB report. 

One of the major reasons for moderation in inflation is drop in food prices because of bumper harvest triggered by good monsoon. 

In March, prices of pulses and legumes fell by 11.2 percent, while vegetables became cheaper by 8.3 percent. Also, prices of ghee and oil dropped by 5.8 percent in that month, while prices of cereal grains, which account for 11.33 percent of the consumer basket, fell by 0.1 percent, shows the NRB report.

However, price of sugar and sugar products jumped 15.2 percent in March because of lower production of the commodity in Nepal and India, which created a short supply of the product.  Among others, prices of clothes and footwear jumped 7.4 percent in March, while house rents and utility bills went up by 7.7 percent. However, transportation cost dropped by 1.3 percent in that month.

Published: 10-04-2017 08:18

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