Nepalis count their paisas as prices take offInflation has gone over 7 percent, leading people to become stingy even during festivals.
School teacher Sunil KC has decided not to return to his hometown Khotang for the Dashain festival this year in order to save money.
“Bus tickets are very expensive. I cannot afford to buy tickets for my family of three,” he said.
KC says it will cost him at least Rs9,000 to travel to his hometown.
“Most of my income is spent on paying the rent for my apartment and my son’s school fees,” said KC. His wife has a part-time job which pays little.
Annual inflation has gone over 7 percent, leading Nepali consumers to become stingy. With prices of goods going through the roof as the festival season approaches, Nepalis are feeling the need to count their paisas.
The price of cumin seed (jeera), an indispensable spice, has reached Rs1,400 to Rs1,500 per kg. A 25 kg-bag of rice costs Rs2,300 to Rs2,400. The cost of sugar has reached Rs130 to Rs140 per kg. A gas cylinder costs Rs1,895. Vegetable prices have jumped sharply.
According to the Nepal Rastra Bank, the year-on-year consumer price inflation stood at 7.52 percent in mid-August 2023 compared to 8.26 percent a year ago.
Food and beverage inflation stood at 8.95 percent while non-food and service inflation stood at 6.42 percent in the review month.
The year-on-year price index of the spices sub-category increased by 45.56 percent, cereal grains and their products by 13.20 percent, milk products and eggs by 12.19 percent, vegetables by 10.80 percent, and ghee and oil by 15.13 percent.
Inflation in clothing and footwear increased by 5.79 percent, and furnishing and household equipment by 6.79 percent.
According to Indian media, the price of cumin seeds rose by 300 percent in the past eight-nine months due to lower production in Gujarat and untimely rainfall. India exports cumin to China, Bangladesh, the United States, the United Arab Emirates, Pakistan, Saudi Arabia and Turkey.
Economist Pushkar Bajracharya said that the festive season would be costly this year, mostly for the low-income bracket.
“Due to high inflation, there is low demand. Inflation does not look like cooling down anytime soon.”
Krishna Bahadur Wagle, proprietor of Krishna Fancy Store at Sankata Bazaar, says customer footfall this festive season is disappointing compared to past years.
“It may be because of high inflation. The prices of newly ordered readymade clothing have increased by Rs300-400 per piece,” he said.
"Compared to last year’s Dashain festival, the prices of all clothing items have increased by more than 20 percent," he said.
The appreciation of the United States dollar against the Nepali rupee has made all imported items very expensive.
The Nepali rupee has plunged to 133 per dollar compared to 127.91 a year ago.
The Brent crude oil price has been rising gradually in recent days. It has reached $93.27 a barrel and could increase further as the US Federal Reserve is expected to raise interest rates further, economists say.
Another factor that has aggravated inflation in Nepal is the current year’s budget which has imposed VAT on almost all essential goods.
The new fiscal year began with 13 percent VAT on vegetables and other food items on top of the 9 percent agriculture service charge and 1.5 percent advance tax for a total of 23.5 percent in taxes.
The Financial Bill has imposed 13 percent VAT on imported onions, potatoes, garlic, peas, frozen green leafy vegetables, collard greens, beans, spinach, sweet corn and other green vegetables.
Besides inflation, India’s protectionist policy has added to the woes of Nepali consumers as the southern neighbour has slapped an export ban on rice, wheat and sugar.
On July 20, India announced an export restriction on non-basmati white rice. On August 25, India imposed a 20 percent export duty on parboiled rice.
On August 20, India imposed a 40 percent export duty on onions which pushed up the wholesale price from around Rs60 per kg to around Rs75 per kg.
“The appreciation of the US dollar and India’s move are the primary reasons for the high inflation in Nepal. But apart from these two external factors, the way prices have gone up in the market is surprising,” said Prem Lal Maharjan, president of the National Consumer Forum.
“We have observed that there are artificial price hikes in almost all commodities.”
In India, its government has imposed several measures to protect consumers, but in Nepal, the government policy itself is supporting inflation, said Maharjan.
Bajracharya too says that Nepal’s supply policy has sent inflation out of control.
“There is no demand in the market even during the key festive season,” he said. “Food inflation has increased by 20-25 percent, and that is the result of faulty policy,” said Bajracharya.