In Nepal, the festivals measure the economy. Last Dashain, the cash crunch forced consumers to trim purchases.

After a year, the situation seems unimproved.

“We are not in the mood to place orders for goods for upcoming festivities,” said Ram Hari Karki, president of Nepal Trans Himalayan Border Commerce Association. “There is no demand at all. It looks like a deep economic slowdown.”

Usually, traders place orders for foreign goods, particularly apparel, three months before the start of Nepal’s key festival season.

Even though traders bring some amount of goods, it may be costlier.

Due to the appreciation of the US dollar and increased customs duties, the prices of goods and commodities may rise, causing difficulties for many ordinary Nepalis.

“Goods are becoming costlier day by day. That is why traders are cautious this year about placing orders,” said Karki. “The demand for festivities has not returned to the pre-pandemic level.”

There are no statistics about consumption during the Dashain, Tihar, and Chhath festivals, but analysts say it grows manifold compared to the normal time.

Kumar Karki, president of the Nepal National Traders’ Federation, said due to subdued demand, they may see a business decline by 15–20 percent. In comparison, prices may rise by 20 percent in the upcoming festivals.

Even during the summer, traders say the market has slowed down.

“Despite the rising heat, the demand for summer garments and shoes has not picked up,” said a trader in New Road, the country’s central shopping hub. “The footfall of shoppers has declined compared to last year’s season, reflecting the decline in people’s incomes.”

“Nowadays, only a handful of traders are planning their trip to China to order goods. We don’t see demand recovering from last year’s drop,” said Kumar Karki.

Some traders say there is a shift in the trade.

In the past years, China fulfilled 80 percent of Nepal’s need for readymade garments.

However, according to three top traders who spoke to the Post, the market seems flooded with Indian goods, which are relatively cheaper.

Currently, traders said, an average of 15–20 loaded trucks are entering from Kerung and Tatopani customs points to the north, carrying garments, shoes and slippers, raincoats, and umbrellas, among other items. Before the Covid pandemic, 50–60 loaded trucks used to enter Nepal from the Chinese border at this time of the year.

Cost is the key factor in subdued demand.

On Friday, the Nepali rupee plunged to an all-time low of Rs134.15 against the dollar. A strong US dollar has advantages and disadvantages. It has negative impacts on an import-based economy like Nepal.

“While importing goods, we must pay 30 to 40 percent as customs duty. The high customs duty has made imported goods expensive,” said Kumar Karki.

The government needed to ease customs through the coming fiscal year's budget and further tighten it, he said. Importing goods through legal channels is becoming more difficult day by day, especially at the customs, and this has encouraged the illegal import of goods.

This has resulted in an import decline.

According to the central bank's macroeconomic report, the inflation rate on non-food and services remained at 2.96 percent in mid-May this year, compared to 8.89 percent a year ago.

The year-on-year price index of clothes and footwear remained at 3.46 percent.

Market analysts, however, say that data presents different facts than the actual market scenario.

Economists say that youth are the significant spenders, and demand has declined in sectors like education and restaurants, including consumption of goods and services, as many youths have migrated abroad to study and work.

Economist Nara Bahadur Thapa said that import-related activities used to increase by 30 percent with the start of a new fiscal year compared to other months before Covid.

However, the number of traders importing goods by opening Letters of Credit (LC) has declined in recent years.

“From July to October, imports used to spike and cross Rs200 billion per month, but now, even with the rise in foreign exchange rate, it hardly crosses Rs150 billion. This shows that the demand has declined as a result of economic slowdown,” Thapa said.

Thapa said that as people's purchasing power has declined, the demand for different goods in major festival times has declined. The salaries of government and private sector employees have not increased in the past few years. “People are not going to spend unless they have money in their hands.”

According to the Department of Customs, Nepal’s imports declined by 1.84 percent to Rs1.45 trillion in the first eleven months of the current fiscal year, which ended in mid-June, compared to the same period last fiscal year.

The country’s imports slipped 16.08 percent to Rs1.61 trillion in the last fiscal year.