Inflation at 17-month high of 6 percentConsumer prices, in March, rose at the fastest pace in the last 17 months on the back of surge in vegetable prices.
Consumer prices, in March, rose at the fastest pace in the last 17 months on the back of surge in vegetable prices.
Prices of vegetables, which make a contribution of 5.5 percent to the consumer basket, soared 28.4 percent in March as drought witnessed during the winter led to fall in production of green produce. This prompted average consumer prices to register a 6-percent jump, says the latest Macroeconomic Report of the Nepal Rastra Bank (NRB), the central bank. The last time inflation had stood at over 6 percent was in October, 2016, according to the central bank.
“Despite spike in prices of vegetables, the annual average inflation is expected to remain below the annual forecast,” says the NRB report. The government has set a target of containing inflation at 7 percent in the current fiscal year. Average inflation so far has stood at 4 percent in the current fiscal year. Average annual inflation had cooled down to 12-year low of 4.5 percent in the last fiscal year.
Inflation has started moderating in Nepal after India formally adopted flexible inflation targeting in June, 2016, making price stability the primary objective of monetary policy. As per this policy, India has fixed inflation target at 4 percent with upper tolerance level of 6 percent and lower limit of 2 percent. This policy has helped Nepal to maintain price stability, as the country imports over 60 percent of goods from India.
Also, Nepal has not witnessed severe supply disruptions since the Indian trade blockade was lifted in February, 2016. This has also helped the government to tame inflation.
However, weather-induced problems, like floods and drought, have lately been exerting pressure on food prices. Food items account for 43.9 percent of the consumer basket.
In March, prices of milk products and eggs went up by 7.9 percent, while prices of meat and fish increased by 4.9 percent. Prices of cereal grains and their products, which make a contribution of 11.3 percent to the consumer basket, jumped 3.1 percent.
Among non-food items, cost of education services surged 9.3 percent, house rent and utilities tariff jumped 8.3 percent and prices of clothes and footwear went up by 7.1 percent in March.
Among geographical regions, Tarai, the southern plains, witnessed sharpest price hike of 6.3 percent in March, followed by the mountainous region (6 percent), hilly region (5.6 percent) and the Kathmandu Valley (4.5 percent).