New Year’s Day of Bikram Sambat used to be the second busiest shopping season after the Dashain and Tihar buying frenzy, but this year the market is quieter as Nepali consumers are holding onto their money because of high interest rates and rising prices, insiders said.

A credit crunch, real estate slowdown, tumbling stock market and rising unemployment have rattled the economy even as a new government was formed.

Domestic automobile dealers say that despite New Year’s sales offers, business is down by 80 percent, discouraging them from launching sales campaigns and discount schemes.

Nirmal Khatri, senior manager of Tata Motors, says double-digit interest rates have kept customers away from auto showrooms. Car buyers have to make a 50 percent down payment and pay 13 percent interest on loans.

“Disposable incomes have declined as a result of high interest rates. Low incomes and a rise in the equated monthly instalment (EMI) makes potential car buyers think twice before making a purchase decision,” Khatri said.

“We also have not launched any special offers or sales campaigns for New Year’s sales amid decreased business, especially in the petrol-diesel category,” Khatri said, adding that electric vehicle sales had not been impacted and sales trends were normal.

Economists say that Nepalis are not buying cars, furniture, gold and clothes. They are spending less at restaurants and purchasing fewer goods for their homes. Consumers are cutting their budgets almost everywhere.

According to Nepal Rastra Bank, the year-on-year consumer price inflation increased by 7.44 percent in mid-March this year compared to 7.14 percent in the same period a year ago. Food and beverage inflation stood at 5.64 percent while non-food and service inflation rose to 8.87 percent in the review month.

According to the Nepal Development Update report by World Bank, higher-than-expected inflation would reduce household purchasing power and drag growth. Welfare recovery remains uncertain due to rising inflation and risks to agricultural production. Reduced investments in human capital, especially amongst those yet to recover from a job loss following Covid-19, also impose risks to rising inequality.

“People are saving their money instead of buying things because of high deposit rates and inflationary pressure, and this has left the market depressed,” said economist Keshav Acharya.

“Most of the loans taken for investment in the productive sector went into buying real estate, and after the government banned land plotting to implement the Land Use Act, it impacted business in the past one and a half years,” he said.

“The share market has also been subdued for the past many months,” he said.

On Tuesday, commercial banks announced they would be slashing interest rates on deposits from Friday, the first day of Bikram Sambat, the official calendar in Nepal. The interest rate on fixed deposits has been brought down to 9.99 from 11 percent. The institutional interest rate on deposits has also been slashed to 7.99 percent from 9 percent.

Earlier in January, banks had decreased the rate on individual fixed deposits by 1 percentage point to 11 percent.

“Before the pandemic, it used to be difficult to get space or time slots for advertisements in the print and broadcast media during the Nepali New Year; but like in every other sector, a slowdown in business has shrunk the advertisement market as well,” said Narayan Kumar Shrestha, senior vice-president of the Advertising Association of Nepal.

“We have no specific data, but advertising by companies and business houses is estimated to have plunged by 80 percent compared to before the pandemic,” said Shrestha who is also managing director of N Multination Media. “Companies and business houses are reluctant to give us advertisement business even when we request them,” he said.

“Sales of products like cement, iron and steel and other construction material sales and automobiles have fallen. The Supreme Court has ordered a ban on liquor advertisements which used to account for a huge market share, especially during the festival season,” Shrestha said.

“Companies and business houses that used to launch ‘dhamaka’ sales campaigns and offers and schemes have cut down sharply due to slowed sales, resulting in a steep drop in the advertising business,” he said. “A rise in the number of media outlets and increased use of digital media have also decreased the advertisement market.”

Bishnu Gyawali, deputy general manager at CG Electronics, says that New Year sales of consumer electronic goods have declined by around 30 percent compared to last year despite launching offers and schemes. “Footfall has declined just like during the Dashain and Tihar festivals last year.”

Government spending has overshot revenues. According to the Financial Comptroller General Office, the government had collected Rs639.59 billion in revenues as of April 7 this fiscal year while its recurrent expenditure during the same period came to Rs681.65 billion.

The government is stressed because it does not have enough resources to pay the salaries of its employees, private sector representatives said on Tuesday. And there are no signs of revenue collection rising substantially as customs and tax offices are reporting continued shortfalls compared to the target.

Despite a sharp drop in international crude oil prices, Nepal’s state-owned oil monopoly has not reduced retail prices citing loans and monies owed to the government and its supplier Indian Oil Corporation, prompting accusations of “unfair profiteering” from consumers.

Experts say that a rise in the price of fuel, every drop of which is imported, makes everything more expensive.